Correlation Between Sandvik AB and Dongfang ElectricLimited
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Dongfang ElectricLimited 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 Dongfang ElectricLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB ADR and Dongfang Electric, you can compare the effects of market volatilities on Sandvik AB and Dongfang ElectricLimited 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 Dongfang ElectricLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Dongfang ElectricLimited.
Diversification Opportunities for Sandvik AB and Dongfang ElectricLimited
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sandvik and Dongfang is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Dongfang Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfang ElectricLimited 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 ADR are associated (or correlated) with Dongfang ElectricLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfang ElectricLimited has no effect on the direction of Sandvik AB i.e., Sandvik AB and Dongfang ElectricLimited go up and down completely randomly.
Pair Corralation between Sandvik AB and Dongfang ElectricLimited
Assuming the 90 days horizon Sandvik AB is expected to generate 17.43 times less return on investment than Dongfang ElectricLimited. But when comparing it to its historical volatility, Sandvik AB ADR is 3.46 times less risky than Dongfang ElectricLimited. It trades about 0.01 of its potential returns per unit of risk. Dongfang Electric is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 32.00 in Dongfang Electric on August 27, 2024 and sell it today you would earn a total of 78.00 from holding Dongfang Electric or generate 243.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB ADR vs. Dongfang Electric
Performance |
| Timeline |
| Sandvik AB ADR |
| Dongfang ElectricLimited |
Sandvik AB and Dongfang ElectricLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Dongfang ElectricLimited
The main advantage of trading using opposite Sandvik AB and Dongfang ElectricLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Dongfang ElectricLimited 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 Dongfang ElectricLimited will offset losses from the drop in Dongfang ElectricLimited's long position.The idea behind Sandvik AB ADR and Dongfang Electric pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dongfang ElectricLimited vs. Sandvik AB ADR | Dongfang ElectricLimited vs. Schneider Electric SA | Dongfang ElectricLimited vs. Fanuc | Dongfang ElectricLimited vs. Rockwell Automation |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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