Correlation Between Atlas Copco and Flowserve
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Flowserve 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 Flowserve 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 Flowserve, you can compare the effects of market volatilities on Atlas Copco and Flowserve 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 Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Flowserve.
Diversification Opportunities for Atlas Copco and Flowserve
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Atlas and Flowserve is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve 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 Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of Atlas Copco i.e., Atlas Copco and Flowserve go up and down completely randomly.
Pair Corralation between Atlas Copco and Flowserve
Assuming the 90 days horizon Atlas Copco AB is expected to under-perform the Flowserve. In addition to that, Atlas Copco is 1.3 times more volatile than Flowserve. It trades about -0.01 of its total potential returns per unit of risk. Flowserve is currently generating about 0.1 per unit of volatility. If you would invest 4,928 in Flowserve on August 29, 2024 and sell it today you would earn a total of 1,145 from holding Flowserve or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Copco AB vs. Flowserve
Performance |
| Timeline |
| Atlas Copco AB |
| Flowserve |
Atlas Copco and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and Flowserve
The main advantage of trading using opposite Atlas Copco and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Flowserve 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 Flowserve will offset losses from the drop in Flowserve's long position.| Atlas Copco vs. Parker Hannifin | Atlas Copco vs. Eaton PLC | Atlas Copco vs. Dover | Atlas Copco vs. Illinois Tool Works |
| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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