Correlation Between Timken and Oatly Group
Can any of the company-specific risk be diversified away by investing in both Timken and Oatly Group 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 Timken and Oatly Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Oatly Group AB, you can compare the effects of market volatilities on Timken and Oatly Group 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 Timken with a short position of Oatly Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Oatly Group.
Diversification Opportunities for Timken and Oatly Group
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Timken and Oatly is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Oatly Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oatly Group AB and Timken 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 Timken Company are associated (or correlated) with Oatly Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oatly Group AB has no effect on the direction of Timken i.e., Timken and Oatly Group go up and down completely randomly.
Pair Corralation between Timken and Oatly Group
Considering the 90-day investment horizon Timken Company is expected to generate 0.62 times more return on investment than Oatly Group. However, Timken Company is 1.62 times less risky than Oatly Group. It trades about -0.1 of its potential returns per unit of risk. Oatly Group AB is currently generating about -0.07 per unit of risk. If you would invest 8,404 in Timken Company on August 30, 2024 and sell it today you would lose (749.00) from holding Timken Company or give up 8.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Timken Company vs. Oatly Group AB
Performance |
| Timeline |
| Timken Company |
| Oatly Group AB |
Timken and Oatly Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Oatly Group
The main advantage of trading using opposite Timken and Oatly Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Oatly Group 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 Oatly Group will offset losses from the drop in Oatly Group's long position.The idea behind Timken Company and Oatly Group 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.| Oatly Group vs. Monster Beverage Corp | Oatly Group vs. Vita Coco | Oatly Group vs. PepsiCo | Oatly Group vs. The Coca Cola |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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