Correlation Between Sandvik AB and Omega Flex

Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Omega Flex 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 Omega Flex 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 Omega Flex, you can compare the effects of market volatilities on Sandvik AB and Omega Flex 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 Omega Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Omega Flex.

Diversification Opportunities for Sandvik AB and Omega Flex

-0.14

Correlation Coefficient

Sandvik AB  Omega Flex

Good diversification

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

Pair Corralation between Sandvik AB and Omega Flex

Assuming the 90 days horizon Sandvik AB ADR is expected to generate 0.87 times more return on investment than Omega Flex. However, Sandvik AB ADR is 1.15 times less risky than Omega Flex. It trades about -0.03 of its potential returns per unit of risk. Omega Flex is currently generating about -0.06 per unit of risk. If you would invest  2,033  in Sandvik AB ADR on September 14, 2024 and sell it today you would lose (90.00) from holding Sandvik AB ADR or give up 4.43% of portfolio value over 90 days.

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

Sandvik AB ADR  vs.  Omega Flex

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 current stock price disturbance, may contribute to short-term losses for the investors.

Omega Flex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Omega Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sandvik AB and Omega Flex

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

The idea behind Sandvik AB ADR and Omega Flex 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.