Correlation Between Atlas Copco and NGK Insulators
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and NGK Insulators 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 NGK Insulators 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 NGK Insulators, you can compare the effects of market volatilities on Atlas Copco and NGK Insulators 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 NGK Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and NGK Insulators.
Diversification Opportunities for Atlas Copco and NGK Insulators
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Atlas and NGK is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators 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 NGK Insulators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGK Insulators has no effect on the direction of Atlas Copco i.e., Atlas Copco and NGK Insulators go up and down completely randomly.
Pair Corralation between Atlas Copco and NGK Insulators
Assuming the 90 days horizon Atlas Copco AB is expected to generate 0.91 times more return on investment than NGK Insulators. However, Atlas Copco AB is 1.1 times less risky than NGK Insulators. It trades about 0.07 of its potential returns per unit of risk. NGK Insulators is currently generating about 0.04 per unit of risk. If you would invest 945.00 in Atlas Copco AB on September 12, 2024 and sell it today you would earn a total of 508.00 from holding Atlas Copco AB or generate 53.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 64.74% |
| Values | Daily Returns |
Atlas Copco AB vs. NGK Insulators
Performance |
| Timeline |
| Atlas Copco AB |
| NGK Insulators |
Atlas Copco and NGK Insulators Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and NGK Insulators
The main advantage of trading using opposite Atlas Copco and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, NGK Insulators 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 NGK Insulators will offset losses from the drop in NGK Insulators' long position.| Atlas Copco vs. Xinjiang Goldwind Science | Atlas Copco vs. American Superconductor | Atlas Copco vs. Cummins | Atlas Copco vs. Aquagold International |
| NGK Insulators vs. NI Holdings | NGK Insulators vs. Pekin Life Insurance | NGK Insulators vs. Palomar Holdings | NGK Insulators vs. Siriuspoint |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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