Correlation Between Sandvik AB and Nordex SE

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

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

Diversification Opportunities for Sandvik AB and Nordex SE

0.73

Correlation Coefficient

Sandvik AB  Nordex SE

Poor diversification

The 3 months correlation between Sandvik and Nordex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Nordex SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordex SE and Sandvik AB 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 Sandvik AB ADR are associated (or correlated) with Nordex SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordex SE has no effect on the direction of Sandvik AB i.e., Sandvik AB and Nordex SE go up and down completely randomly.

Pair Corralation between Sandvik AB and Nordex SE

Assuming the 90 days horizon Sandvik AB ADR is expected to generate 0.49 times more return on investment than Nordex SE. However, Sandvik AB ADR is 2.03 times less risky than Nordex SE. It trades about -0.08 of its potential returns per unit of risk. Nordex SE is currently generating about -0.21 per unit of risk. If you would invest  1,942  in Sandvik AB ADR on September 5, 2024 and sell it today you would lose (70.00) from holding Sandvik AB ADR or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Sandvik AB ADR  vs.  Nordex SE

Sandvik AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Sandvik AB and Nordex SE

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

The idea behind Sandvik AB ADR and Nordex SE 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.