Correlation Between Atlas Copco and Alfa Laval
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Alfa Laval 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 Alfa Laval 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 Alfa Laval AB, you can compare the effects of market volatilities on Atlas Copco and Alfa Laval 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 Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Alfa Laval.
Diversification Opportunities for Atlas Copco and Alfa Laval
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Atlas and Alfa is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval 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 Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Alfa Laval go up and down completely randomly.
Pair Corralation between Atlas Copco and Alfa Laval
Assuming the 90 days horizon Atlas Copco is expected to generate 1.09 times less return on investment than Alfa Laval. In addition to that, Atlas Copco is 1.51 times more volatile than Alfa Laval AB. It trades about 0.06 of its total potential returns per unit of risk. Alfa Laval AB is currently generating about 0.1 per unit of volatility. If you would invest 2,405 in Alfa Laval AB on August 29, 2024 and sell it today you would earn a total of 2,143 from holding Alfa Laval AB or generate 89.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 70.16% |
| Values | Daily Returns |
Atlas Copco AB vs. Alfa Laval AB
Performance |
| Timeline |
| Atlas Copco AB |
| Alfa Laval AB |
Atlas Copco and Alfa Laval Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and Alfa Laval
The main advantage of trading using opposite Atlas Copco and Alfa Laval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Alfa Laval 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 Alfa Laval will offset losses from the drop in Alfa Laval's long position.| Atlas Copco vs. Parker Hannifin | Atlas Copco vs. Eaton PLC | Atlas Copco vs. Dover | Atlas Copco vs. Illinois Tool Works |
| Alfa Laval vs. Parker Hannifin | Alfa Laval vs. Eaton PLC | Alfa Laval vs. Dover | Alfa Laval vs. Illinois Tool Works |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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