Correlation Between Atlas Copco and Nidec

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

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

Diversification Opportunities for Atlas Copco and Nidec

0.47

Correlation Coefficient

Atlas Copco  Nidec

Very weak diversification

The 3 months correlation between Atlas and Nidec is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco ADR and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 ADR are associated (or correlated) with Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Atlas Copco i.e., Atlas Copco and Nidec go up and down completely randomly.

Pair Corralation between Atlas Copco and Nidec

If you would invest  1,360  in Nidec on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Nidec or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Atlas Copco ADR  vs.  Nidec

Atlas Copco ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nidec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Atlas Copco and Nidec

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

The idea behind Atlas Copco ADR and Nidec 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.