Correlation Between Nordex SE and Atlas Copco

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

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

Diversification Opportunities for Nordex SE and Atlas Copco

-0.14

Correlation Coefficient

Nordex SE  Atlas Copco

Good diversification

The 3 months correlation between Nordex and Atlas is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nordex SE and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and Nordex SE 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 Nordex SE are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of Nordex SE i.e., Nordex SE and Atlas Copco go up and down completely randomly.

Pair Corralation between Nordex SE and Atlas Copco

Assuming the 90 days horizon Nordex SE is expected to under-perform the Atlas Copco. In addition to that, Nordex SE is 1.17 times more volatile than Atlas Copco AB. It trades about -0.14 of its total potential returns per unit of risk. Atlas Copco AB is currently generating about 0.03 per unit of volatility. If you would invest  1,552  in Atlas Copco AB on September 5, 2024 and sell it today you would earn a total of  46.00  from holding Atlas Copco AB or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nordex SE  vs.  Atlas Copco AB

Nordex SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordex SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators 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.

Atlas Copco AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Atlas Copco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nordex SE and Atlas Copco

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

The idea behind Nordex SE and Atlas Copco 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 Transaction History module to view history of all your transactions and understand their impact on performance.