Correlation Between Atlas Copco and Nordex SE

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Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Nordex SE 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 Nordex SE 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 Nordex SE, you can compare the effects of market volatilities on Atlas Copco and Nordex SE 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 Nordex SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Nordex SE.

Diversification Opportunities for Atlas Copco and Nordex SE

-0.87
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Atlas and Nordex is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Nordex SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordex SE 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 Nordex SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordex SE has no effect on the direction of Atlas Copco i.e., Atlas Copco and Nordex SE go up and down completely randomly.

Pair Corralation between Atlas Copco and Nordex SE

Assuming the 90 days horizon Atlas Copco AB is expected to generate 0.68 times more return on investment than Nordex SE. However, Atlas Copco AB is 1.48 times less risky than Nordex SE. It trades about 0.1 of its potential returns per unit of risk. Nordex SE is currently generating about 0.02 per unit of risk. If you would invest  1,088  in Atlas Copco AB on August 25, 2024 and sell it today you would earn a total of  488.00  from holding Atlas Copco AB or generate 44.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Atlas Copco AB  vs.  Nordex SE

 Performance 
       Timeline  
Atlas Copco AB 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Atlas Copco reported solid returns over the last few months and may actually be approaching a breakup point.
Nordex SE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nordex SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Atlas Copco and Nordex SE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Atlas Copco and Nordex SE

The main advantage of trading using opposite Atlas Copco and Nordex SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Nordex SE 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 Nordex SE will offset losses from the drop in Nordex SE's long position.
The idea behind Atlas Copco AB and Nordex SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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