Correlation Between Atlas Copco and Sleep Cycle

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

Diversification Opportunities for Atlas Copco and Sleep Cycle

0.66

Correlation Coefficient

Atlas Copco  Sleep Cycle

Poor diversification

The 3 months correlation between Atlas and Sleep is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Sleep Cycle AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Cycle 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 Sleep Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Cycle AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Sleep Cycle go up and down completely randomly.

Pair Corralation between Atlas Copco and Sleep Cycle

Assuming the 90 days trading horizon Atlas Copco AB is expected to generate 0.56 times more return on investment than Sleep Cycle. However, Atlas Copco AB is 1.79 times less risky than Sleep Cycle. It trades about 0.0 of its potential returns per unit of risk. Sleep Cycle AB is currently generating about -0.18 per unit of risk. If you would invest  17,155  in Atlas Copco AB on September 21, 2024 and sell it today you would lose (15.00) from holding Atlas Copco AB or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Atlas Copco AB  vs.  Sleep Cycle AB

Atlas Copco AB

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Atlas Copco and Sleep Cycle

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

The idea behind Atlas Copco AB and Sleep Cycle 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.