Correlation Between AP Mller and SGS SA

Can any of the company-specific risk be diversified away by investing in both AP Mller and SGS SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AP Mller and SGS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Mller and SGS SA, you can compare the effects of market volatilities on AP Mller and SGS SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AP Mller with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Mller and SGS SA.

Diversification Opportunities for AP Mller and SGS SA

0.31

Correlation Coefficient

AP Mller  SGS SA

Weak diversification

The 3 months correlation between AMKBF and SGS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and AP Mller is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AP Mller are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of AP Mller i.e., AP Mller and SGS SA go up and down completely randomly.

Pair Corralation between AP Mller and SGS SA

Assuming the 90 days horizon AP Mller is expected to generate 1.98 times more return on investment than SGS SA. However, AP Mller is 1.98 times more volatile than SGS SA. It trades about 0.12 of its potential returns per unit of risk. SGS SA is currently generating about -0.04 per unit of risk. If you would invest  188,523  in AP Mller on May 15, 2025 and sell it today you would earn a total of  30,477  from holding AP Mller or generate 16.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AP Mller   vs.  SGS SA

AP Mller

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, AP Mller reported solid returns over the last few months and may actually be approaching a breakup point.

SGS SA

Risk-Adjusted Performance

Weakest

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SGS SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AP Mller and SGS SA

The main advantage of trading using opposite AP Mller and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Mller position performs unexpectedly, SGS SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SGS SA will offset losses from the drop in SGS SA's long position.

The idea behind AP Mller and SGS SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.