Correlation Between Sandvik AB and ABB
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and ABB 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 Sandvik AB and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and ABB, you can compare the effects of market volatilities on Sandvik AB and ABB 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 Sandvik AB with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and ABB.
Diversification Opportunities for Sandvik AB and ABB
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sandvik and ABB is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Sandvik AB 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 Sandvik AB are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Sandvik AB i.e., Sandvik AB and ABB go up and down completely randomly.
Pair Corralation between Sandvik AB and ABB
Assuming the 90 days trading horizon Sandvik AB is expected to under-perform the ABB. In addition to that, Sandvik AB is 1.29 times more volatile than ABB. It trades about -0.11 of its total potential returns per unit of risk. ABB is currently generating about 0.19 per unit of volatility. If you would invest 59,300 in ABB on September 1, 2024 and sell it today you would earn a total of 2,660 from holding ABB or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. ABB
Performance |
| Timeline |
| Sandvik AB |
| ABB |
Sandvik AB and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and ABB
The main advantage of trading using opposite Sandvik AB and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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