Correlation Between Absolent Group and Sandvik AB

Can any of the company-specific risk be diversified away by investing in both Absolent Group 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 Absolent Group and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absolent Group AB and Sandvik AB, you can compare the effects of market volatilities on Absolent Group 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 Absolent Group with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolent Group and Sandvik AB.

Diversification Opportunities for Absolent Group and Sandvik AB

-0.2

Correlation Coefficient

Absolent Group  Sandvik AB

Good diversification

The 3 months correlation between Absolent and Sandvik is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Absolent Group AB and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB and Absolent Group 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 Absolent Group AB 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 has no effect on the direction of Absolent Group i.e., Absolent Group and Sandvik AB go up and down completely randomly.

Pair Corralation between Absolent Group and Sandvik AB

Assuming the 90 days trading horizon Absolent Group is expected to generate 9.76 times less return on investment than Sandvik AB. In addition to that, Absolent Group is 1.58 times more volatile than Sandvik AB. It trades about 0.01 of its total potential returns per unit of risk. Sandvik AB is currently generating about 0.13 per unit of volatility. If you would invest  19,965  in Sandvik AB on December 24, 2024 and sell it today you would earn a total of  2,845  from holding Sandvik AB or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Absolent Group AB  vs.  Sandvik AB

Absolent Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absolent Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Absolent Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sandvik AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sandvik AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Absolent Group and Sandvik AB

The main advantage of trading using opposite Absolent Group and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolent Group 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 Absolent Group AB and Sandvik 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.