Correlation Between Spirax Sarco and Atlas Copco

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

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

Diversification Opportunities for Spirax Sarco and Atlas Copco

0.61

Correlation Coefficient

Spirax Sarco  Atlas Copco

Poor diversification

The 3 months correlation between Spirax and Atlas is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Spirax Sarco Engineering PLC and Atlas Copco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco ADR and Spirax Sarco 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 Spirax Sarco Engineering PLC 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 ADR has no effect on the direction of Spirax Sarco i.e., Spirax Sarco and Atlas Copco go up and down completely randomly.

Pair Corralation between Spirax Sarco and Atlas Copco

Assuming the 90 days horizon Spirax Sarco Engineering PLC is expected to generate 1.21 times more return on investment than Atlas Copco. However, Spirax Sarco is 1.21 times more volatile than Atlas Copco ADR. It trades about 0.0 of its potential returns per unit of risk. Atlas Copco ADR is currently generating about -0.03 per unit of risk. If you would invest  4,850  in Spirax Sarco Engineering PLC on September 12, 2024 and sell it today you would lose (62.00) from holding Spirax Sarco Engineering PLC or give up 1.28% of portfolio value over 90 days.

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

Spirax Sarco Engineering PLC  vs.  Atlas Copco ADR

Spirax Sarco Enginee

Risk-Adjusted Performance

0 of 100

Very Weak

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

Atlas Copco ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Spirax Sarco and Atlas Copco

The main advantage of trading using opposite Spirax Sarco and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirax Sarco 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 Spirax Sarco Engineering PLC and Atlas Copco ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.