Correlation Between Atlas Copco and SMC Corp

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

Diversification Opportunities for Atlas Copco and SMC Corp

0.44

Correlation Coefficient

Atlas Copco  SMC Corp

Very weak diversification

The 3 months correlation between Atlas and SMC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and SMC Corp Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Corp Japan 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 SMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Corp Japan has no effect on the direction of Atlas Copco i.e., Atlas Copco and SMC Corp go up and down completely randomly.

Pair Corralation between Atlas Copco and SMC Corp

Assuming the 90 days horizon Atlas Copco AB is expected to under-perform the SMC Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Atlas Copco AB is 1.15 times less risky than SMC Corp. The pink sheet trades about -0.09 of its potential returns per unit of risk. The SMC Corp Japan is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,147  in SMC Corp Japan on August 31, 2024 and sell it today you would lose (23.00) from holding SMC Corp Japan or give up 1.07% of portfolio value over 90 days.

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

Atlas Copco AB  vs.  SMC Corp Japan

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. In spite of latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SMC Corp Japan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SMC Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Atlas Copco and SMC Corp

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

The idea behind Atlas Copco AB and SMC Corp Japan 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.