Correlation Between Sandvik AB and Graco

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

Diversification Opportunities for Sandvik AB and Graco

-0.3

Correlation Coefficient

Sandvik AB  Graco

Very good diversification

The 3 months correlation between Sandvik and Graco is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc 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 Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of Sandvik AB i.e., Sandvik AB and Graco go up and down completely randomly.

Pair Corralation between Sandvik AB and Graco

Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the Graco. In addition to that, Sandvik AB is 1.22 times more volatile than Graco Inc. It trades about -0.19 of its total potential returns per unit of risk. Graco Inc is currently generating about 0.32 per unit of volatility. If you would invest  8,161  in Graco Inc on August 31, 2024 and sell it today you would earn a total of  895.00  from holding Graco Inc or generate 10.97% return on investment over 90 days.

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

Sandvik AB ADR  vs.  Graco Inc

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.

Graco Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Graco may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sandvik AB and Graco

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

The idea behind Sandvik AB ADR and Graco Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.