Correlation Between AB SKF and Atlas Copco
Can any of the company-specific risk be diversified away by investing in both AB SKF and Atlas Copco 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 AB SKF and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Atlas Copco AB, you can compare the effects of market volatilities on AB SKF and Atlas Copco 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 AB SKF with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Atlas Copco.
Diversification Opportunities for AB SKF and Atlas Copco
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between SKF-B and Atlas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and AB SKF 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 AB SKF are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of AB SKF i.e., AB SKF and Atlas Copco go up and down completely randomly.
Pair Corralation between AB SKF and Atlas Copco
Assuming the 90 days trading horizon AB SKF is expected to generate 1.33 times less return on investment than Atlas Copco. In addition to that, AB SKF is 1.07 times more volatile than Atlas Copco AB. It trades about 0.03 of its total potential returns per unit of risk. Atlas Copco AB is currently generating about 0.04 per unit of volatility. If you would invest 12,637 in Atlas Copco AB on August 29, 2024 and sell it today you would earn a total of 2,598 from holding Atlas Copco AB or generate 20.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB SKF vs. Atlas Copco AB
Performance |
| Timeline |
| AB SKF |
| Atlas Copco AB |
AB SKF and Atlas Copco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Atlas Copco
The main advantage of trading using opposite AB SKF and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF position performs unexpectedly, Atlas Copco 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 Atlas Copco will offset losses from the drop in Atlas Copco's long position.The idea behind AB SKF and Atlas Copco AB 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.| Atlas Copco vs. Sandvik AB | Atlas Copco vs. AB SKF | Atlas Copco vs. Alfa Laval AB | Atlas Copco vs. ASSA ABLOY AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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