Correlation Between Absolent Group and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Absolent Group and Sandvik AB 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 Absolent Group and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolent Group AB and Sandvik AB, you can compare the effects of market volatilities on Absolent Group and Sandvik AB 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 Absolent Group with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolent Group and Sandvik AB.
Diversification Opportunities for Absolent Group and Sandvik AB
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolent and Sandvik is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Absolent Group AB and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB and Absolent Group 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 Absolent Group AB are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Absolent Group i.e., Absolent Group and Sandvik AB go up and down completely randomly.
Pair Corralation between Absolent Group and Sandvik AB
Assuming the 90 days trading horizon Absolent Group AB is expected to generate 2.83 times more return on investment than Sandvik AB. However, Absolent Group is 2.83 times more volatile than Sandvik AB. It trades about 0.42 of its potential returns per unit of risk. Sandvik AB is currently generating about -0.48 per unit of risk. If you would invest 24,100 in Absolent Group AB on October 9, 2024 and sell it today you would earn a total of 4,700 from holding Absolent Group AB or generate 19.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolent Group AB vs. Sandvik AB
Performance |
| Timeline |
| Absolent Group AB |
| Sandvik AB |
Absolent Group and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolent Group and Sandvik AB
The main advantage of trading using opposite Absolent Group and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolent Group position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| Absolent Group vs. AQ Group AB | Absolent Group vs. Troax Group AB | Absolent Group vs. Bufab Holding AB | Absolent Group vs. Beijer Ref AB |
| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden AB |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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