Correlation Between AB SKF and Snap On
Can any of the company-specific risk be diversified away by investing in both AB SKF and Snap On 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 Snap On into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Snap On, you can compare the effects of market volatilities on AB SKF and Snap On 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 Snap On. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Snap On.
Diversification Opportunities for AB SKF and Snap On
Very weak diversification
The 3 months correlation between SKUFF and Snap is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On 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 Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of AB SKF i.e., AB SKF and Snap On go up and down completely randomly.
Pair Corralation between AB SKF and Snap On
Assuming the 90 days horizon AB SKF is expected to generate 1.67 times less return on investment than Snap On. In addition to that, AB SKF is 1.73 times more volatile than Snap On. It trades about 0.03 of its total potential returns per unit of risk. Snap On is currently generating about 0.08 per unit of volatility. If you would invest 25,730 in Snap On on September 1, 2024 and sell it today you would earn a total of 11,239 from holding Snap On or generate 43.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 60.22% |
| Values | Daily Returns |
AB SKF vs. Snap On
Performance |
| Timeline |
| AB SKF |
| Snap On |
AB SKF and Snap On Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Snap On
The main advantage of trading using opposite AB SKF and Snap On positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF position performs unexpectedly, Snap On 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 Snap On will offset losses from the drop in Snap On's long position.The idea behind AB SKF and Snap On 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.| Snap On vs. Lincoln Electric Holdings | Snap On vs. Timken Company | Snap On vs. Kennametal | Snap On vs. Toro 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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