Correlation Between Atlas Copco and Sandvik AB

Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Sandvik AB 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 Atlas Copco and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Atlas Copco AB and Sandvik AB, you can compare the effects of market volatilities on Atlas Copco and Sandvik AB 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 Atlas Copco with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Sandvik AB.

Diversification Opportunities for Atlas Copco and Sandvik AB

0.94

Correlation Coefficient

Atlas Copco  Sandvik AB

Almost no diversification

The 3 months correlation between Atlas and Sandvik is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB and Atlas Copco 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 Atlas Copco AB are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Sandvik AB go up and down completely randomly.

Pair Corralation between Atlas Copco and Sandvik AB

Assuming the 90 days trading horizon Atlas Copco AB is expected to generate 0.99 times more return on investment than Sandvik AB. However, Atlas Copco AB is 1.01 times less risky than Sandvik AB. It trades about -0.02 of its potential returns per unit of risk. Sandvik AB is currently generating about -0.11 per unit of risk. If you would invest  17,540  in Atlas Copco AB on September 1, 2024 and sell it today you would lose (125.00) from holding Atlas Copco AB or give up 0.71% of portfolio value over 90 days.

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

Atlas Copco AB  vs.  Sandvik AB

Atlas Copco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Copco AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Atlas Copco is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Sandvik AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandvik AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sandvik AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Atlas Copco and Sandvik AB

The main advantage of trading using opposite Atlas Copco and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.

The idea behind Atlas Copco AB and Sandvik AB 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.