Correlation Between Weichai Power and Atlas Copco
Can any of the company-specific risk be diversified away by investing in both Weichai Power 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 Weichai Power and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weichai Power and Atlas Copco AB, you can compare the effects of market volatilities on Weichai Power 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 Weichai Power with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Power and Atlas Copco.
Diversification Opportunities for Weichai Power and Atlas Copco
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Weichai and Atlas is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Power 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 Weichai Power 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 Weichai Power 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 Weichai Power i.e., Weichai Power and Atlas Copco go up and down completely randomly.
Pair Corralation between Weichai Power and Atlas Copco
Assuming the 90 days horizon Weichai Power is expected to under-perform the Atlas Copco. In addition to that, Weichai Power is 1.48 times more volatile than Atlas Copco AB. It trades about -0.01 of its total potential returns per unit of risk. Atlas Copco AB is currently generating about 0.05 per unit of volatility. If you would invest 1,178 in Atlas Copco AB on September 1, 2024 and sell it today you would earn a total of 414.00 from holding Atlas Copco AB or generate 35.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 23.74% |
| Values | Daily Returns |
Weichai Power vs. Atlas Copco AB
Performance |
| Timeline |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Atlas Copco AB |
Weichai Power and Atlas Copco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weichai Power and Atlas Copco
The main advantage of trading using opposite Weichai Power and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weichai Power 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.| Weichai Power vs. Shanghai Electric Group | Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Nordson | Weichai Power vs. CVD Equipment |
| Atlas Copco vs. GE Aerospace | Atlas Copco vs. Eaton PLC | Atlas Copco vs. Siemens AG Class | Atlas Copco vs. Parker Hannifin |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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