Correlation Between Dear Cashmere and Sandvik AB

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

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

Diversification Opportunities for Dear Cashmere and Sandvik AB

-0.5

Correlation Coefficient

Dear Cashmere  Sandvik AB

Very good diversification

The 3 months correlation between Dear and Sandvik is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dear Cashmere Holding 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 Dear Cashmere 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 Dear Cashmere Holding 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 Dear Cashmere i.e., Dear Cashmere and Sandvik AB go up and down completely randomly.

Pair Corralation between Dear Cashmere and Sandvik AB

Given the investment horizon of 90 days Dear Cashmere Holding is expected to under-perform the Sandvik AB. In addition to that, Dear Cashmere is 5.38 times more volatile than Sandvik AB ADR. It trades about -0.08 of its total potential returns per unit of risk. Sandvik AB ADR is currently generating about 0.13 per unit of volatility. If you would invest  1,872  in Sandvik AB ADR on December 2, 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 Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Dear Cashmere Holding  vs.  Sandvik AB ADR

Dear Cashmere Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dear Cashmere Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 Dear Cashmere and Sandvik AB

The main advantage of trading using opposite Dear Cashmere and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dear Cashmere 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 Dear Cashmere Holding 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.