Correlation Between Atlas Copco and Trelleborg

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

Diversification Opportunities for Atlas Copco and Trelleborg

0.02

Correlation Coefficient

Atlas Copco  Trelleborg

Significant diversification

The 3 months correlation between Atlas and Trelleborg is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Trelleborg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trelleborg 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 Trelleborg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trelleborg AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Trelleborg go up and down completely randomly.

Pair Corralation between Atlas Copco and Trelleborg

Assuming the 90 days trading horizon Atlas Copco AB is expected to generate 1.12 times more return on investment than Trelleborg. However, Atlas Copco is 1.12 times more volatile than Trelleborg AB. It trades about -0.17 of its potential returns per unit of risk. Trelleborg AB is currently generating about -0.24 per unit of risk. If you would invest  18,120  in Atlas Copco AB on October 10, 2024 and sell it today you would lose (615.00) from holding Atlas Copco AB or give up 3.39% of portfolio value over 90 days.

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

Atlas Copco AB  vs.  Trelleborg 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.

Trelleborg AB

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Atlas Copco and Trelleborg

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

The idea behind Atlas Copco AB and Trelleborg 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.