Correlation Between IDEX and Atlas Copco
Can any of the company-specific risk be diversified away by investing in both IDEX and Atlas Copco 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 IDEX and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Atlas Copco ADR, you can compare the effects of market volatilities on IDEX and Atlas Copco 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 IDEX with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Atlas Copco.
Diversification Opportunities for IDEX and Atlas Copco
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IDEX and Atlas is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Atlas Copco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco ADR and IDEX 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 IDEX Corporation are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco ADR has no effect on the direction of IDEX i.e., IDEX and Atlas Copco go up and down completely randomly.
Pair Corralation between IDEX and Atlas Copco
Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.89 times more return on investment than Atlas Copco. However, IDEX Corporation is 1.13 times less risky than Atlas Copco. It trades about 0.14 of its potential returns per unit of risk. Atlas Copco ADR is currently generating about -0.12 per unit of risk. If you would invest 20,450 in IDEX Corporation on August 29, 2024 and sell it today you would earn a total of 2,752 from holding IDEX Corporation or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Atlas Copco ADR
Performance |
| Timeline |
| IDEX |
| Atlas Copco ADR |
IDEX and Atlas Copco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Atlas Copco
The main advantage of trading using opposite IDEX and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX position performs unexpectedly, Atlas Copco 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 Atlas Copco will offset losses from the drop in Atlas Copco's long position.The idea behind IDEX Corporation and Atlas Copco ADR 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.| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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