Correlation Between Atlas Copco and Holmen AB
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Holmen 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 Atlas Copco and Holmen AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas Copco AB and Holmen AB, you can compare the effects of market volatilities on Atlas Copco and Holmen 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 Atlas Copco with a short position of Holmen AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Holmen AB.
Diversification Opportunities for Atlas Copco and Holmen AB
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Atlas and Holmen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB and Atlas Copco 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 Atlas Copco AB are associated (or correlated) with Holmen AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmen AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Holmen AB go up and down completely randomly.
Pair Corralation between Atlas Copco and Holmen AB
Assuming the 90 days trading horizon Atlas Copco AB is expected to under-perform the Holmen AB. In addition to that, Atlas Copco is 1.28 times more volatile than Holmen AB. It trades about -0.15 of its total potential returns per unit of risk. Holmen AB is currently generating about -0.15 per unit of volatility. If you would invest 42,440 in Holmen AB on August 24, 2024 and sell it today you would lose (1,640) from holding Holmen AB or give up 3.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Copco AB vs. Holmen AB
Performance |
| Timeline |
| Atlas Copco AB |
| Holmen AB |
Atlas Copco and Holmen AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and Holmen AB
The main advantage of trading using opposite Atlas Copco and Holmen AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Holmen 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 Holmen AB will offset losses from the drop in Holmen AB's long position.| Atlas Copco vs. Atlas Copco AB | Atlas Copco vs. Trelleborg AB | Atlas Copco vs. Troax Group AB | Atlas Copco vs. OptiCept Technologies AB |
| Holmen AB vs. Svenska Cellulosa Aktiebolaget | Holmen AB vs. BillerudKorsnas AB | Holmen AB vs. Boliden AB | Holmen AB vs. Husqvarna 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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