Correlation Between Snowflake and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Snowflake and Sandvik AB 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 Snowflake and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and Sandvik AB ADR, you can compare the effects of market volatilities on Snowflake and Sandvik AB 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 Snowflake with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Sandvik AB.
Diversification Opportunities for Snowflake and Sandvik AB
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Snowflake and Sandvik is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR and Snowflake 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 Snowflake are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of Snowflake i.e., Snowflake and Sandvik AB go up and down completely randomly.
Pair Corralation between Snowflake and Sandvik AB
Given the investment horizon of 90 days Snowflake is expected to generate 3.83 times more return on investment than Sandvik AB. However, Snowflake is 3.83 times more volatile than Sandvik AB ADR. It trades about 0.26 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about -0.17 per unit of risk. If you would invest 11,492 in Snowflake on August 25, 2024 and sell it today you would earn a total of 5,252 from holding Snowflake or generate 45.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snowflake vs. Sandvik AB ADR
Performance |
| Timeline |
| Snowflake |
| Sandvik AB ADR |
Snowflake and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snowflake and Sandvik AB
The main advantage of trading using opposite Snowflake and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.The idea behind Snowflake and Sandvik AB ADR 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.| Sandvik AB vs. Rockwell Automation | Sandvik AB vs. Schneider Electric SA | Sandvik AB vs. Fanuc | Sandvik AB vs. Vestas Wind Systems |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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