Correlation Between Sandvik AB and Hexagon AB
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Hexagon 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 Sandvik AB and Hexagon AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Hexagon AB, you can compare the effects of market volatilities on Sandvik AB and Hexagon 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 Sandvik AB with a short position of Hexagon AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Hexagon AB.
Diversification Opportunities for Sandvik AB and Hexagon AB
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sandvik and Hexagon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Hexagon AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon 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 Hexagon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon AB has no effect on the direction of Sandvik AB i.e., Sandvik AB and Hexagon AB go up and down completely randomly.
Pair Corralation between Sandvik AB and Hexagon AB
Assuming the 90 days trading horizon Sandvik AB is expected to generate 0.93 times more return on investment than Hexagon AB. However, Sandvik AB is 1.07 times less risky than Hexagon AB. It trades about 0.02 of its potential returns per unit of risk. Hexagon AB is currently generating about -0.02 per unit of risk. If you would invest 18,394 in Sandvik AB on September 3, 2024 and sell it today you would earn a total of 2,236 from holding Sandvik AB or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. Hexagon AB
Performance |
| Timeline |
| Sandvik AB |
| Hexagon AB |
Sandvik AB and Hexagon AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Hexagon AB
The main advantage of trading using opposite Sandvik AB and Hexagon AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Hexagon 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 Hexagon AB will offset losses from the drop in Hexagon AB's long position.| Sandvik AB vs. AB SKF | Sandvik AB vs. ASSA ABLOY AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden AB |
| Hexagon AB vs. ASSA ABLOY AB | Hexagon AB vs. Sandvik AB | Hexagon AB vs. Investor AB ser | Hexagon AB vs. NIBE Industrier 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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