Correlation Between AB SKF and Stanley Black

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

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

Diversification Opportunities for AB SKF and Stanley Black

-0.16

Correlation Coefficient

AB SKF  Stanley Black

Good diversification

The 3 months correlation between SKFA and Stanley is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker and AB SKF 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 AB SKF are associated (or correlated) with Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of AB SKF i.e., AB SKF and Stanley Black go up and down completely randomly.

Pair Corralation between AB SKF and Stanley Black

Assuming the 90 days trading horizon AB SKF is expected to generate 1.06 times less return on investment than Stanley Black. In addition to that, AB SKF is 1.51 times more volatile than Stanley Black Decker. It trades about 0.27 of its total potential returns per unit of risk. Stanley Black Decker is currently generating about 0.43 per unit of volatility. If you would invest  7,758  in Stanley Black Decker on October 27, 2024 and sell it today you would earn a total of  684.00  from holding Stanley Black Decker or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

AB SKF  vs.  Stanley Black Decker

AB SKF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, AB SKF may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stanley Black Decker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stanley Black Decker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AB SKF and Stanley Black

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

The idea behind AB SKF and Stanley Black Decker 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.