Correlation Between Atlas Copco and NEL ASA

Can any of the company-specific risk be diversified away by investing in both Atlas Copco and NEL ASA 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 Atlas Copco and NEL ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Atlas Copco A and NEL ASA ADR30, you can compare the effects of market volatilities on Atlas Copco and NEL ASA 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 Atlas Copco with a short position of NEL ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and NEL ASA.

Diversification Opportunities for Atlas Copco and NEL ASA

-0.47

Correlation Coefficient

Atlas Copco  NEL ASA

Very good diversification

The 3 months correlation between Atlas and NEL is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco A and NEL ASA ADR30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEL ASA ADR30 and Atlas Copco 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 Atlas Copco A are associated (or correlated) with NEL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEL ASA ADR30 has no effect on the direction of Atlas Copco i.e., Atlas Copco and NEL ASA go up and down completely randomly.

Pair Corralation between Atlas Copco and NEL ASA

Assuming the 90 days horizon Atlas Copco is expected to generate 1.08 times less return on investment than NEL ASA. But when comparing it to its historical volatility, Atlas Copco A is 3.08 times less risky than NEL ASA. It trades about 0.07 of its potential returns per unit of risk. NEL ASA ADR30 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  675.00  in NEL ASA ADR30 on December 28, 2024 and sell it today you would lose (40.00) from holding NEL ASA ADR30 or give up 5.93% of portfolio value over 90 days.

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

Atlas Copco A  vs.  NEL ASA ADR30

Atlas Copco A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Atlas Copco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NEL ASA ADR30

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEL ASA ADR30 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, NEL ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Atlas Copco and NEL ASA

The main advantage of trading using opposite Atlas Copco and NEL ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, NEL ASA 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 NEL ASA will offset losses from the drop in NEL ASA's long position.

The idea behind Atlas Copco A and NEL ASA ADR30 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.