Correlation Between Assa Abloy and ATWEC Technologies

Can any of the company-specific risk be diversified away by investing in both Assa Abloy and ATWEC Technologies 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 Assa Abloy and ATWEC Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Assa Abloy and ATWEC Technologies

0.19

Correlation Coefficient

Assa Abloy  ATWEC Technologies

Average diversification

The 3 months correlation between Assa and ATWEC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Assa Abloy AB and ATWEC Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATWEC Technologies and Assa Abloy 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 Assa Abloy AB are associated (or correlated) with ATWEC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATWEC Technologies has no effect on the direction of Assa Abloy i.e., Assa Abloy and ATWEC Technologies go up and down completely randomly.

Pair Corralation between Assa Abloy and ATWEC Technologies

Assuming the 90 days horizon Assa Abloy is expected to generate 28.97 times less return on investment than ATWEC Technologies. But when comparing it to its historical volatility, Assa Abloy AB is 13.21 times less risky than ATWEC Technologies. It trades about 0.05 of its potential returns per unit of risk. ATWEC Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.11  in ATWEC Technologies on December 20, 2024 and sell it today you would earn a total of  0.02  from holding ATWEC Technologies or generate 18.18% return on investment over 90 days.

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

Assa Abloy AB  vs.  ATWEC Technologies

Assa Abloy AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Assa Abloy AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Assa Abloy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ATWEC Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATWEC Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, ATWEC Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Assa Abloy and ATWEC Technologies

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

The idea behind Assa Abloy AB and ATWEC Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.