Correlation Between SMC Corp and Atlas Copco

Can any of the company-specific risk be diversified away by investing in both SMC Corp and Atlas Copco 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 SMC Corp and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SMC Corp and Atlas Copco

-0.28

Correlation Coefficient

SMC Corp  Atlas Copco

Very good diversification

The 3 months correlation between SMC and Atlas is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and SMC Corp 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 SMC Corp are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of SMC Corp i.e., SMC Corp and Atlas Copco go up and down completely randomly.

Pair Corralation between SMC Corp and Atlas Copco

Assuming the 90 days horizon SMC Corp is expected to generate 1.57 times less return on investment than Atlas Copco. In addition to that, SMC Corp is 1.63 times more volatile than Atlas Copco AB. It trades about 0.03 of its total potential returns per unit of risk. Atlas Copco AB is currently generating about 0.08 per unit of volatility. If you would invest  1,530  in Atlas Copco AB on December 28, 2024 and sell it today you would earn a total of  124.00  from holding Atlas Copco AB or generate 8.1% return on investment over 90 days.

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

SMC Corp  vs.  Atlas Copco AB

SMC Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Atlas Copco AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, Atlas Copco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SMC Corp and Atlas Copco

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

The idea behind SMC Corp and Atlas Copco AB 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .