Correlation Between Sandvik AB and Gates Industrial
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Gates Industrial 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 Gates Industrial 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 Gates Industrial, you can compare the effects of market volatilities on Sandvik AB and Gates Industrial 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 Gates Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Gates Industrial.
Diversification Opportunities for Sandvik AB and Gates Industrial
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sandvik and Gates is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Gates Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gates 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 ADR are associated (or correlated) with Gates Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gates Industrial has no effect on the direction of Sandvik AB i.e., Sandvik AB and Gates Industrial go up and down completely randomly.
Pair Corralation between Sandvik AB and Gates Industrial
Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the Gates Industrial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sandvik AB ADR is 1.18 times less risky than Gates Industrial. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Gates Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,172 in Gates Industrial on September 3, 2024 and sell it today you would earn a total of 1,044 from holding Gates Industrial or generate 89.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB ADR vs. Gates Industrial
Performance |
| Timeline |
| Sandvik AB ADR |
| Gates Industrial |
Sandvik AB and Gates Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Gates Industrial
The main advantage of trading using opposite Sandvik AB and Gates Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Gates Industrial 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 Gates Industrial will offset losses from the drop in Gates Industrial's long position.| Sandvik AB vs. Dear Cashmere Holding | Sandvik AB vs. Goff Corp | Sandvik AB vs. Wialan Technologies | Sandvik AB vs. Cgrowth Capital |
| Gates Industrial vs. Crane NXT Co | Gates Industrial vs. Donaldson | Gates Industrial vs. ITT Inc | Gates Industrial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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