Correlation Between Sandvik AB and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Dow Jones Industrial, you can compare the effects of market volatilities on Sandvik AB and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Dow Jones.
Diversification Opportunities for Sandvik AB and Dow Jones
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sandvik and Dow is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Sandvik AB i.e., Sandvik AB and Dow Jones go up and down completely randomly.
Pair Corralation between Sandvik AB and Dow Jones
Assuming the 90 days trading horizon Sandvik AB is expected to generate 2.88 times more return on investment than Dow Jones. However, Sandvik AB is 2.88 times more volatile than Dow Jones Industrial. It trades about 0.3 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.33 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 | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sandvik AB vs. Dow Jones Industrial
Performance |
| Timeline |
Sandvik AB and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sandvik AB
Pair trading matchups for Sandvik AB
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sandvik AB and Dow Jones
The main advantage of trading using opposite Sandvik AB and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden AB |
| Dow Jones vs. Rambler Metals and | Dow Jones vs. Nicola Mining | Dow Jones vs. Old Dominion Freight | Dow Jones vs. United Guardian |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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