Correlation Between Sandvik AB and Fanuc

Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Fanuc 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 Fanuc 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 Fanuc, you can compare the effects of market volatilities on Sandvik AB and Fanuc 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 Fanuc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Fanuc.

Diversification Opportunities for Sandvik AB and Fanuc

0.76

Correlation Coefficient

Sandvik AB  Fanuc

Poor diversification

The 3 months correlation between Sandvik and Fanuc is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc 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 Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Sandvik AB i.e., Sandvik AB and Fanuc go up and down completely randomly.

Pair Corralation between Sandvik AB and Fanuc

Assuming the 90 days horizon Sandvik AB ADR is expected to generate 1.23 times more return on investment than Fanuc. However, Sandvik AB is 1.23 times more volatile than Fanuc. It trades about 0.16 of its potential returns per unit of risk. Fanuc is currently generating about 0.11 per unit of risk. If you would invest  1,804  in Sandvik AB ADR on December 29, 2024 and sell it today you would earn a total of  384.00  from holding Sandvik AB ADR or generate 21.29% return on investment over 90 days.

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

Sandvik AB ADR  vs.  Fanuc

Sandvik AB ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB ADR are ranked lower than 12 (%) 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.

Fanuc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fanuc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Fanuc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sandvik AB and Fanuc

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

The idea behind Sandvik AB ADR and Fanuc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.