Correlation Between Sandvik AB and DSV Panalpina

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

By analyzing existing cross correlation between Sandvik AB ADR and DSV Panalpina AS, you can compare the effects of market volatilities on Sandvik AB and DSV Panalpina 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 DSV Panalpina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and DSV Panalpina.

Diversification Opportunities for Sandvik AB and DSV Panalpina

0.01

Correlation Coefficient

Sandvik AB  DSV Panalpina

Significant diversification

The 3 months correlation between Sandvik and DSV is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and DSV Panalpina AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSV Panalpina AS 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 ADR are associated (or correlated) with DSV Panalpina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSV Panalpina AS has no effect on the direction of Sandvik AB i.e., Sandvik AB and DSV Panalpina go up and down completely randomly.

Pair Corralation between Sandvik AB and DSV Panalpina

Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the DSV Panalpina. In addition to that, Sandvik AB is 1.5 times more volatile than DSV Panalpina AS. It trades about -0.12 of its total potential returns per unit of risk. DSV Panalpina AS is currently generating about -0.06 per unit of volatility. If you would invest  11,042  in DSV Panalpina AS on September 4, 2024 and sell it today you would lose (189.00) from holding DSV Panalpina AS or give up 1.71% of portfolio value over 90 days.

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

Sandvik AB ADR  vs.  DSV Panalpina AS

Sandvik AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandvik AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

DSV Panalpina AS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DSV Panalpina AS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DSV Panalpina showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandvik AB and DSV Panalpina

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

The idea behind Sandvik AB ADR and DSV Panalpina AS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.