Correlation Between NGK Insulators and Atlas Copco
Can any of the company-specific risk be diversified away by investing in both NGK Insulators 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 NGK Insulators and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NGK Insulators and Atlas Copco AB, you can compare the effects of market volatilities on NGK Insulators 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 NGK Insulators with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGK Insulators and Atlas Copco.
Diversification Opportunities for NGK Insulators and Atlas Copco
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NGK and Atlas is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NGK Insulators and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and NGK Insulators 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 NGK Insulators 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 AB has no effect on the direction of NGK Insulators i.e., NGK Insulators and Atlas Copco go up and down completely randomly.
Pair Corralation between NGK Insulators and Atlas Copco
Assuming the 90 days horizon NGK Insulators is expected to generate 3.99 times less return on investment than Atlas Copco. In addition to that, NGK Insulators is 1.41 times more volatile than Atlas Copco AB. It trades about 0.02 of its total potential returns per unit of risk. Atlas Copco AB is currently generating about 0.1 per unit of volatility. If you would invest 554.00 in Atlas Copco AB on September 13, 2024 and sell it today you would earn a total of 899.00 from holding Atlas Copco AB or generate 162.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 72.47% |
| Values | Daily Returns |
NGK Insulators vs. Atlas Copco AB
Performance |
| Timeline |
| NGK Insulators |
| Atlas Copco AB |
NGK Insulators and Atlas Copco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGK Insulators and Atlas Copco
The main advantage of trading using opposite NGK Insulators and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGK Insulators 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.| NGK Insulators vs. Xinjiang Goldwind Science | NGK Insulators vs. American Superconductor | NGK Insulators vs. Cummins | NGK Insulators vs. Aquagold International |
| Atlas Copco vs. Xinjiang Goldwind Science | Atlas Copco vs. American Superconductor | Atlas Copco vs. Cummins | Atlas Copco vs. Aquagold International |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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