Correlation Between Industrivarden and Atlas Copco

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

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

Diversification Opportunities for Industrivarden and Atlas Copco

0.71

Correlation Coefficient

Industrivarden  Atlas Copco

Poor diversification

The 3 months correlation between Industrivarden and Atlas is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser 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 Industrivarden 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 Industrivarden AB ser 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 Industrivarden i.e., Industrivarden and Atlas Copco go up and down completely randomly.

Pair Corralation between Industrivarden and Atlas Copco

Assuming the 90 days trading horizon Industrivarden AB ser is expected to generate 0.68 times more return on investment than Atlas Copco. However, Industrivarden AB ser is 1.47 times less risky than Atlas Copco. It trades about 0.07 of its potential returns per unit of risk. Atlas Copco AB is currently generating about 0.04 per unit of risk. If you would invest  25,167  in Industrivarden AB ser on September 26, 2024 and sell it today you would earn a total of  9,513  from holding Industrivarden AB ser or generate 37.8% return on investment over 90 days.

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

Industrivarden AB ser  vs.  Atlas Copco AB

Industrivarden AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrivarden AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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 uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrivarden and Atlas Copco

The main advantage of trading using opposite Industrivarden and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrivarden 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 Industrivarden AB ser 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.