Correlation Between Sandvik AB and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Vestas Wind 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 Vestas Wind 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 Vestas Wind Systems, you can compare the effects of market volatilities on Sandvik AB and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Vestas Wind.
Diversification Opportunities for Sandvik AB and Vestas Wind
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandvik and Vestas is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Sandvik AB i.e., Sandvik AB and Vestas Wind go up and down completely randomly.
Pair Corralation between Sandvik AB and Vestas Wind
Assuming the 90 days horizon Sandvik AB ADR is expected to generate 0.57 times more return on investment than Vestas Wind. However, Sandvik AB ADR is 1.75 times less risky than Vestas Wind. It trades about -0.08 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.18 per unit of risk. If you would invest 2,204 in Sandvik AB ADR on August 29, 2024 and sell it today you would lose (366.00) from holding Sandvik AB ADR or give up 16.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB ADR vs. Vestas Wind Systems
Performance |
| Timeline |
| Sandvik AB ADR |
| Vestas Wind Systems |
Sandvik AB and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Vestas Wind
The main advantage of trading using opposite Sandvik AB and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Sandvik AB vs. Parker Hannifin | Sandvik AB vs. Eaton PLC | Sandvik AB vs. Dover | Sandvik AB vs. Illinois Tool Works |
| Vestas Wind vs. Parker Hannifin | Vestas Wind vs. Eaton PLC | Vestas Wind vs. Dover | Vestas Wind vs. Illinois Tool Works |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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