Correlation Between Atlas Copco and Serstech

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

Diversification Opportunities for Atlas Copco and Serstech

-0.56

Correlation Coefficient

Atlas Copco  Serstech

Excellent diversification

The 3 months correlation between Atlas and Serstech is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Serstech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Serstech 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 Serstech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Serstech AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Serstech go up and down completely randomly.

Pair Corralation between Atlas Copco and Serstech

Assuming the 90 days trading horizon Atlas Copco AB is expected to generate 0.26 times more return on investment than Serstech. However, Atlas Copco AB is 3.85 times less risky than Serstech. It trades about 0.02 of its potential returns per unit of risk. Serstech AB is currently generating about -0.02 per unit of risk. If you would invest  15,626  in Atlas Copco AB on September 12, 2024 and sell it today you would earn a total of  214.00  from holding Atlas Copco AB or generate 1.37% return on investment over 90 days.

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

Atlas Copco AB  vs.  Serstech AB

Atlas Copco AB

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Serstech AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Serstech AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Atlas Copco and Serstech

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

The idea behind Atlas Copco AB and Serstech 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.