Correlation Between Atlas Copco and Idun Industrier

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

By analyzing existing cross correlation between Atlas Copco AB and Idun Industrier AB, you can compare the effects of market volatilities on Atlas Copco and Idun Industrier 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 Idun Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Idun Industrier.

Diversification Opportunities for Atlas Copco and Idun Industrier

-0.05

Correlation Coefficient

Atlas Copco  Idun Industrier

Good diversification

The 3 months correlation between Atlas and Idun is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Idun Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idun Industrier AB 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 AB are associated (or correlated) with Idun Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idun Industrier AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Idun Industrier go up and down completely randomly.

Pair Corralation between Atlas Copco and Idun Industrier

Assuming the 90 days trading horizon Atlas Copco AB is expected to under-perform the Idun Industrier. But the stock apears to be less risky and, when comparing its historical volatility, Atlas Copco AB is 1.24 times less risky than Idun Industrier. The stock trades about -0.02 of its potential returns per unit of risk. The Idun Industrier AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  30,000  in Idun Industrier AB on December 30, 2024 and sell it today you would earn a total of  3,300  from holding Idun Industrier AB or generate 11.0% return on investment over 90 days.

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

Atlas Copco AB  vs.  Idun Industrier AB

Atlas Copco AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atlas Copco AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Atlas Copco is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Idun Industrier AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Idun Industrier AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Idun Industrier may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Atlas Copco and Idun Industrier

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

The idea behind Atlas Copco AB and Idun Industrier 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.