Correlation Between Sandvik AB and Rockwell Automation
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Rockwell Automation 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 Rockwell Automation 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 Rockwell Automation, you can compare the effects of market volatilities on Sandvik AB and Rockwell Automation 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 Rockwell Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Rockwell Automation.
Diversification Opportunities for Sandvik AB and Rockwell Automation
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sandvik and Rockwell is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation 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 Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of Sandvik AB i.e., Sandvik AB and Rockwell Automation go up and down completely randomly.
Pair Corralation between Sandvik AB and Rockwell Automation
Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the Rockwell Automation. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sandvik AB ADR is 1.2 times less risky than Rockwell Automation. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Rockwell Automation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 28,366 in Rockwell Automation on September 1, 2024 and sell it today you would earn a total of 1,148 from holding Rockwell Automation or generate 4.05% 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. Rockwell Automation
Performance |
| Timeline |
| Sandvik AB ADR |
| Rockwell Automation |
Sandvik AB and Rockwell Automation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Rockwell Automation
The main advantage of trading using opposite Sandvik AB and Rockwell Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Rockwell Automation 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 Rockwell Automation will offset losses from the drop in Rockwell Automation's long position.| Sandvik AB vs. GE Aerospace | Sandvik AB vs. Eaton PLC | Sandvik AB vs. Siemens AG Class | Sandvik AB vs. Parker Hannifin |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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