Correlation Between Sandvik AB and Elekta AB

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

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

Diversification Opportunities for Sandvik AB and Elekta AB

0.78

Correlation Coefficient

Sandvik AB  Elekta AB

Poor diversification

The 3 months correlation between Sandvik and Elekta is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Elekta AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elekta AB and Sandvik AB 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 Sandvik AB are associated (or correlated) with Elekta AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elekta AB has no effect on the direction of Sandvik AB i.e., Sandvik AB and Elekta AB go up and down completely randomly.

Pair Corralation between Sandvik AB and Elekta AB

Assuming the 90 days trading horizon Sandvik AB is expected to generate 0.75 times more return on investment than Elekta AB. However, Sandvik AB is 1.33 times less risky than Elekta AB. It trades about 0.06 of its potential returns per unit of risk. Elekta AB is currently generating about 0.01 per unit of risk. If you would invest  20,410  in Sandvik AB on September 12, 2024 and sell it today you would earn a total of  920.00  from holding Sandvik AB or generate 4.51% return on investment over 90 days.

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

Sandvik AB  vs.  Elekta AB

Sandvik AB

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sandvik AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Elekta AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elekta AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Elekta AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sandvik AB and Elekta AB

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

The idea behind Sandvik AB and Elekta 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.