Correlation Between IHI Corp and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both IHI Corp and Sandvik AB 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 IHI Corp and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IHI Corp ADR and Sandvik AB ADR, you can compare the effects of market volatilities on IHI Corp and Sandvik AB 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 IHI Corp with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IHI Corp and Sandvik AB.
Diversification Opportunities for IHI Corp and Sandvik AB
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IHI and Sandvik is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding IHI Corp ADR and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR and IHI Corp 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 IHI Corp ADR are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of IHI Corp i.e., IHI Corp and Sandvik AB go up and down completely randomly.
Pair Corralation between IHI Corp and Sandvik AB
Assuming the 90 days horizon IHI Corp ADR is expected to generate 2.96 times more return on investment than Sandvik AB. However, IHI Corp is 2.96 times more volatile than Sandvik AB ADR. It trades about 0.23 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about 0.16 per unit of risk. If you would invest 1,187 in IHI Corp ADR on November 28, 2024 and sell it today you would earn a total of 272.00 from holding IHI Corp ADR or generate 22.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IHI Corp ADR vs. Sandvik AB ADR
Performance |
| Timeline |
| IHI Corp ADR |
| Sandvik AB ADR |
IHI Corp and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IHI Corp and Sandvik AB
The main advantage of trading using opposite IHI Corp and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IHI Corp position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| IHI Corp vs. Sandvik AB ADR | IHI Corp vs. Schneider Electric SA | IHI Corp vs. Fanuc | IHI Corp vs. Rockwell Automation |
| Sandvik AB vs. Rockwell Automation | Sandvik AB vs. Schneider Electric SA | Sandvik AB vs. Fanuc | Sandvik AB vs. Vestas Wind Systems |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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