Correlation Between Fanuc and Sandvik AB

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

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

Diversification Opportunities for Fanuc and Sandvik AB

0.34

Correlation Coefficient

Fanuc  Sandvik AB

Weak diversification

The 3 months correlation between Fanuc and Sandvik is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fanuc and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB and Fanuc 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 Fanuc 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 Fanuc i.e., Fanuc and Sandvik AB go up and down completely randomly.

Pair Corralation between Fanuc and Sandvik AB

Assuming the 90 days horizon Fanuc is expected to generate 2.81 times more return on investment than Sandvik AB. However, Fanuc is 2.81 times more volatile than Sandvik AB. It trades about 0.0 of its potential returns per unit of risk. Sandvik AB is currently generating about -0.11 per unit of risk. If you would invest  2,881  in Fanuc on September 4, 2024 and sell it today you would lose (256.00) from holding Fanuc or give up 8.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fanuc  vs.  Sandvik AB

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fanuc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fanuc and Sandvik AB

The main advantage of trading using opposite Fanuc and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fanuc 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 Fanuc 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.