Correlation Between Atlas Copco and Ushio

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

Diversification Opportunities for Atlas Copco and Ushio

0.27

Correlation Coefficient

Atlas Copco  Ushio

Modest diversification

The 3 months correlation between Atlas and Ushio is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Ushio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ushio Inc 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 Ushio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ushio Inc has no effect on the direction of Atlas Copco i.e., Atlas Copco and Ushio go up and down completely randomly.

Pair Corralation between Atlas Copco and Ushio

Assuming the 90 days horizon Atlas Copco is expected to generate 4.01 times less return on investment than Ushio. In addition to that, Atlas Copco is 1.36 times more volatile than Ushio Inc. It trades about 0.02 of its total potential returns per unit of risk. Ushio Inc is currently generating about 0.1 per unit of volatility. If you would invest  1,302  in Ushio Inc on September 14, 2024 and sell it today you would earn a total of  98.00  from holding Ushio Inc or generate 7.53% return on investment over 90 days.

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

Atlas Copco AB  vs.  Ushio Inc

Atlas Copco AB

Risk-Adjusted Performance

1 of 100

Weak

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 nearly stable technical and fundamental indicators, Atlas Copco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ushio Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ushio Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Ushio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Atlas Copco and Ushio

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

The idea behind Atlas Copco AB and Ushio Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.