Correlation Between Atlas Copco and RATIONAL Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both Atlas Copco and RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellschaft, you can compare the effects of market volatilities on Atlas Copco and RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and RATIONAL Aktiengesellscha.

Diversification Opportunities for Atlas Copco and RATIONAL Aktiengesellscha

0.62

Correlation Coefficient

Atlas Copco  RATIONAL Aktiengesellscha

Poor diversification

The 3 months correlation between Atlas and RATIONAL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco A and RATIONAL Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RATIONAL Aktiengesellscha has no effect on the direction of Atlas Copco i.e., Atlas Copco and RATIONAL Aktiengesellscha go up and down completely randomly.

Pair Corralation between Atlas Copco and RATIONAL Aktiengesellscha

Assuming the 90 days horizon Atlas Copco A is expected to generate 1.75 times more return on investment than RATIONAL Aktiengesellscha. However, Atlas Copco is 1.75 times more volatile than RATIONAL Aktiengesellschaft. It trades about 0.04 of its potential returns per unit of risk. RATIONAL Aktiengesellschaft is currently generating about -0.07 per unit of risk. If you would invest  1,440  in Atlas Copco A on December 30, 2024 and sell it today you would earn a total of  60.00  from holding Atlas Copco A or generate 4.17% return on investment over 90 days.

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

Atlas Copco A  vs.  RATIONAL Aktiengesellschaft

Atlas Copco A

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Atlas Copco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

RATIONAL Aktiengesellscha

Risk-Adjusted Performance

Very Weak

Over the last 90 days RATIONAL Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Atlas Copco and RATIONAL Aktiengesellscha

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

The idea behind Atlas Copco A and RATIONAL Aktiengesellschaft 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.