Correlation Between Sandvik AB and AB SKF
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and AB SKF 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 AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and AB SKF, you can compare the effects of market volatilities on Sandvik AB and AB SKF 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 AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and AB SKF.
Diversification Opportunities for Sandvik AB and AB SKF
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandvik and SKF-B is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Sandvik AB i.e., Sandvik AB and AB SKF go up and down completely randomly.
Pair Corralation between Sandvik AB and AB SKF
Assuming the 90 days trading horizon Sandvik AB is expected to generate 1.25 times less return on investment than AB SKF. But when comparing it to its historical volatility, Sandvik AB is 1.06 times less risky than AB SKF. It trades about 0.03 of its potential returns per unit of risk. AB SKF is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,208 in AB SKF on November 3, 2024 and sell it today you would earn a total of 2,272 from holding AB SKF or generate 11.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Sandvik AB vs. AB SKF
Performance |
| Timeline |
| Sandvik AB |
| AB SKF |
Sandvik AB and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and AB SKF
The main advantage of trading using opposite Sandvik AB and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, AB SKF 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 AB SKF will offset losses from the drop in AB SKF'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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |