Correlation Between Sandvik AB and Alfa Laval
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Alfa Laval 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 Alfa Laval into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Alfa Laval AB, you can compare the effects of market volatilities on Sandvik AB and Alfa Laval 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 Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Alfa Laval.
Diversification Opportunities for Sandvik AB and Alfa Laval
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandvik and Alfa is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB 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 Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of Sandvik AB i.e., Sandvik AB and Alfa Laval go up and down completely randomly.
Pair Corralation between Sandvik AB and Alfa Laval
Assuming the 90 days trading horizon Sandvik AB is expected to generate 1.81 times more return on investment than Alfa Laval. However, Sandvik AB is 1.81 times more volatile than Alfa Laval AB. It trades about 0.3 of its potential returns per unit of risk. Alfa Laval AB is currently generating about 0.21 per unit of risk. If you would invest 20,120 in Sandvik AB on November 3, 2024 and sell it today you would earn a total of 2,880 from holding Sandvik AB or generate 14.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. Alfa Laval AB
Performance |
| Timeline |
| Sandvik AB |
| Alfa Laval AB |
Sandvik AB and Alfa Laval Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Alfa Laval
The main advantage of trading using opposite Sandvik AB and Alfa Laval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Alfa Laval 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 Alfa Laval will offset losses from the drop in Alfa Laval'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 |
| Alfa Laval vs. Sandvik AB | Alfa Laval vs. AB SKF | Alfa Laval vs. ASSA ABLOY AB | Alfa Laval vs. Atlas Copco 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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