Correlation Between AB SKF and Techtronic Industries
Can any of the company-specific risk be diversified away by investing in both AB SKF and Techtronic Industries 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 Techtronic Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Techtronic Industries, you can compare the effects of market volatilities on AB SKF and Techtronic Industries 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 Techtronic Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Techtronic Industries.
Diversification Opportunities for AB SKF and Techtronic Industries
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SKFA and Techtronic is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Techtronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries 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 Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of AB SKF i.e., AB SKF and Techtronic Industries go up and down completely randomly.
Pair Corralation between AB SKF and Techtronic Industries
Assuming the 90 days trading horizon AB SKF is expected to generate 0.77 times more return on investment than Techtronic Industries. However, AB SKF is 1.3 times less risky than Techtronic Industries. It trades about 0.26 of its potential returns per unit of risk. Techtronic Industries is currently generating about 0.05 per unit of risk. If you would invest 1,734 in AB SKF on September 15, 2024 and sell it today you would earn a total of 172.00 from holding AB SKF or generate 9.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB SKF vs. Techtronic Industries
Performance |
| Timeline |
| AB SKF |
| Techtronic Industries |
AB SKF and Techtronic Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Techtronic Industries
The main advantage of trading using opposite AB SKF and Techtronic Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF position performs unexpectedly, Techtronic Industries 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 Techtronic Industries will offset losses from the drop in Techtronic Industries' long position.| AB SKF vs. Techtronic Industries | AB SKF vs. Stanley Black Decker | AB SKF vs. Toro Co | AB SKF vs. Lincoln Electric Holdings |
| Techtronic Industries vs. Stanley Black Decker | Techtronic Industries vs. Toro Co | Techtronic Industries vs. Lincoln Electric Holdings | Techtronic Industries vs. AB SKF |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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