Correlation Between Atlas Copco and Smith AO
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Smith AO 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 Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas Copco ADR and Smith AO, you can compare the effects of market volatilities on Atlas Copco and Smith AO 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 Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Smith AO.
Diversification Opportunities for Atlas Copco and Smith AO
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Atlas and Smith is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco ADR and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO 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 ADR are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Atlas Copco i.e., Atlas Copco and Smith AO go up and down completely randomly.
Pair Corralation between Atlas Copco and Smith AO
Assuming the 90 days horizon Atlas Copco ADR is expected to generate 1.11 times more return on investment than Smith AO. However, Atlas Copco is 1.11 times more volatile than Smith AO. It trades about -0.01 of its potential returns per unit of risk. Smith AO is currently generating about -0.02 per unit of risk. If you would invest 1,467 in Atlas Copco ADR on August 25, 2024 and sell it today you would lose (87.00) from holding Atlas Copco ADR or give up 5.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Copco ADR vs. Smith AO
Performance |
| Timeline |
| Atlas Copco ADR |
| Smith AO |
Atlas Copco and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and Smith AO
The main advantage of trading using opposite Atlas Copco and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Smith AO 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 Smith AO will offset losses from the drop in Smith AO's long position.| Atlas Copco vs. Amaero International | Atlas Copco vs. Aumann AG | Atlas Copco vs. Atlas Copco AB | Atlas Copco vs. Alfa Laval AB |
| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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