Correlation Between Atlas Copco and Gapwaves

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

Diversification Opportunities for Atlas Copco and Gapwaves

0.09

Correlation Coefficient

Atlas Copco  Gapwaves

Significant diversification

The 3 months correlation between Atlas and Gapwaves is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Gapwaves AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gapwaves AB Series 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 Gapwaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gapwaves AB Series has no effect on the direction of Atlas Copco i.e., Atlas Copco and Gapwaves go up and down completely randomly.

Pair Corralation between Atlas Copco and Gapwaves

Assuming the 90 days trading horizon Atlas Copco AB is expected to generate 0.58 times more return on investment than Gapwaves. However, Atlas Copco AB is 1.72 times less risky than Gapwaves. It trades about 0.04 of its potential returns per unit of risk. Gapwaves AB Series is currently generating about -0.04 per unit of risk. If you would invest  11,506  in Atlas Copco AB on September 28, 2024 and sell it today you would earn a total of  3,409  from holding Atlas Copco AB or generate 29.63% return on investment over 90 days.

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

Atlas Copco AB  vs.  Gapwaves AB Series

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 uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Atlas Copco and Gapwaves

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

The idea behind Atlas Copco AB and Gapwaves AB Series 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.