Correlation Between Sandvik AB and Flowserve
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Flowserve 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 Flowserve into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Flowserve, you can compare the effects of market volatilities on Sandvik AB and Flowserve 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 Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Flowserve.
Diversification Opportunities for Sandvik AB and Flowserve
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sandvik and Flowserve is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve 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 Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of Sandvik AB i.e., Sandvik AB and Flowserve go up and down completely randomly.
Pair Corralation between Sandvik AB and Flowserve
Assuming the 90 days horizon Sandvik AB is expected to under-perform the Flowserve. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sandvik AB is 1.01 times less risky than Flowserve. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Flowserve is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,928 in Flowserve on August 29, 2024 and sell it today you would earn a total of 1,145 from holding Flowserve or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. Flowserve
Performance |
| Timeline |
| Sandvik AB |
| Flowserve |
Sandvik AB and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Flowserve
The main advantage of trading using opposite Sandvik AB and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Flowserve 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 Flowserve will offset losses from the drop in Flowserve's long position.| Sandvik AB vs. Schneider Electric SA | Sandvik AB vs. KONE Oyj | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Sandvik AB ADR |
| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve vs. Franklin Electric Co |
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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