Correlation Between Gapwaves and Atlas Copco

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

By analyzing existing cross correlation between Gapwaves AB Series and Atlas Copco AB, you can compare the effects of market volatilities on Gapwaves and Atlas Copco 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 Gapwaves with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gapwaves and Atlas Copco.

Diversification Opportunities for Gapwaves and Atlas Copco

0.14

Correlation Coefficient

Gapwaves  Atlas Copco

Average diversification

The 3 months correlation between Gapwaves and Atlas is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gapwaves AB Series and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and Gapwaves 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 Gapwaves AB Series are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of Gapwaves i.e., Gapwaves and Atlas Copco go up and down completely randomly.

Pair Corralation between Gapwaves and Atlas Copco

Assuming the 90 days trading horizon Gapwaves AB Series is expected to generate 5.52 times more return on investment than Atlas Copco. However, Gapwaves is 5.52 times more volatile than Atlas Copco AB. It trades about 0.1 of its potential returns per unit of risk. Atlas Copco AB is currently generating about 0.0 per unit of risk. If you would invest  1,298  in Gapwaves AB Series on October 16, 2024 and sell it today you would earn a total of  102.00  from holding Gapwaves AB Series or generate 7.86% return on investment over 90 days.

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

Gapwaves AB Series  vs.  Atlas Copco AB

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. 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.

Pair Trading with Gapwaves and Atlas Copco

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

The idea behind Gapwaves AB Series and Atlas Copco 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.