Correlation Between Sandvik AB and Randstad Holdings

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

Diversification Opportunities for Sandvik AB and Randstad Holdings

0.32

Correlation Coefficient

Sandvik AB  Randstad Holdings

Weak diversification

The 3 months correlation between Sandvik and Randstad is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR and Randstad Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Randstad Holdings 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 Randstad Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Randstad Holdings has no effect on the direction of Sandvik AB i.e., Sandvik AB and Randstad Holdings go up and down completely randomly.

Pair Corralation between Sandvik AB and Randstad Holdings

Assuming the 90 days horizon Sandvik AB ADR is expected to generate 0.89 times more return on investment than Randstad Holdings. However, Sandvik AB ADR is 1.12 times less risky than Randstad Holdings. It trades about 0.16 of its potential returns per unit of risk. Randstad Holdings NV is currently generating about 0.06 per unit of risk. If you would invest  1,804  in Sandvik AB ADR on December 30, 2024 and sell it today you would earn a total of  385.00  from holding Sandvik AB ADR or generate 21.34% return on investment over 90 days.

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

Sandvik AB ADR  vs.  Randstad Holdings NV

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.

Randstad Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Randstad Holdings NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking indicators, Randstad Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sandvik AB and Randstad Holdings

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

The idea behind Sandvik AB ADR and Randstad Holdings NV 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.