Correlation Between Sandvik AB and Sodexo PK

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

Diversification Opportunities for Sandvik AB and Sodexo PK

-0.28

Correlation Coefficient

Sandvik AB  Sodexo PK

Very good diversification

The 3 months correlation between Sandvik and Sodexo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Sodexo PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo PK 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 Sodexo PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo PK has no effect on the direction of Sandvik AB i.e., Sandvik AB and Sodexo PK go up and down completely randomly.

Pair Corralation between Sandvik AB and Sodexo PK

Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the Sodexo PK. In addition to that, Sandvik AB is 1.01 times more volatile than Sodexo PK. It trades about -0.06 of its total potential returns per unit of risk. Sodexo PK is currently generating about -0.03 per unit of volatility. If you would invest  1,743  in Sodexo PK on September 4, 2024 and sell it today you would lose (76.00) from holding Sodexo PK or give up 4.36% 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.  Sodexo PK

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 latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sodexo PK

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sandvik AB and Sodexo PK

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

The idea behind Sandvik AB ADR and Sodexo PK 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.