Correlation Between Dupont De and Sandvik AB

Can any of the company-specific risk be diversified away by investing in both Dupont De and Sandvik AB 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 Dupont De and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Sandvik AB ADR, you can compare the effects of market volatilities on Dupont De and Sandvik AB 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 Dupont De with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Sandvik AB.

Diversification Opportunities for Dupont De and Sandvik AB

0.32

Correlation Coefficient

Dupont De  Sandvik AB

Weak diversification

The 3 months correlation between Dupont and Sandvik is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR and Dupont De 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 Dupont De Nemours are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of Dupont De i.e., Dupont De and Sandvik AB go up and down completely randomly.

Pair Corralation between Dupont De and Sandvik AB

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Sandvik AB. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.3 times less risky than Sandvik AB. The stock trades about -0.02 of its potential returns per unit of risk. The Sandvik AB ADR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,872  in Sandvik AB ADR on December 1, 2024 and sell it today you would earn a total of  285.00  from holding Sandvik AB ADR or generate 15.22% return on investment over 90 days.

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

Dupont De Nemours  vs.  Sandvik AB ADR

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Sandvik AB ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Sandvik AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Sandvik AB

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

The idea behind Dupont De Nemours and Sandvik AB ADR 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.