Correlation Between Atlas Copco and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Vestas Wind 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 Vestas Wind 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 Vestas Wind Systems, you can compare the effects of market volatilities on Atlas Copco and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Vestas Wind.
Diversification Opportunities for Atlas Copco and Vestas Wind
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Atlas and Vestas is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco ADR and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Atlas Copco i.e., Atlas Copco and Vestas Wind go up and down completely randomly.
Pair Corralation between Atlas Copco and Vestas Wind
Assuming the 90 days horizon Atlas Copco ADR is expected to generate 0.39 times more return on investment than Vestas Wind. However, Atlas Copco ADR is 2.56 times less risky than Vestas Wind. It trades about -0.24 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.31 per unit of risk. If you would invest 1,509 in Atlas Copco ADR on August 29, 2024 and sell it today you would lose (133.00) from holding Atlas Copco ADR or give up 8.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Copco ADR vs. Vestas Wind Systems
Performance |
| Timeline |
| Atlas Copco ADR |
| Vestas Wind Systems |
Atlas Copco and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and Vestas Wind
The main advantage of trading using opposite Atlas Copco and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind'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 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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