Correlation Between Spirax-Sarco Engineering and Atlas Copco

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

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

Diversification Opportunities for Spirax-Sarco Engineering and Atlas Copco

0.29

Correlation Coefficient

Spirax-Sarco Engineering  Atlas Copco

Modest diversification

The 3 months correlation between Spirax-Sarco and Atlas is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Spirax Sarco Engineering PLC 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 Spirax-Sarco Engineering 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 Spirax Sarco Engineering PLC 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 Spirax-Sarco Engineering i.e., Spirax-Sarco Engineering and Atlas Copco go up and down completely randomly.

Pair Corralation between Spirax-Sarco Engineering and Atlas Copco

Assuming the 90 days horizon Spirax-Sarco Engineering is expected to generate 3.08 times less return on investment than Atlas Copco. But when comparing it to its historical volatility, Spirax Sarco Engineering PLC is 1.1 times less risky than Atlas Copco. It trades about 0.03 of its potential returns per unit of risk. Atlas Copco AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,656  in Atlas Copco AB on December 20, 2024 and sell it today you would earn a total of  139.00  from holding Atlas Copco AB or generate 8.39% return on investment over 90 days.

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

Spirax Sarco Engineering PLC  vs.  Atlas Copco AB

Spirax-Sarco Engineering

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spirax Sarco Engineering PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Spirax-Sarco Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Despite nearly fragile basic indicators, Atlas Copco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Spirax-Sarco Engineering and Atlas Copco

The main advantage of trading using opposite Spirax-Sarco Engineering and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirax-Sarco Engineering 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 Spirax Sarco Engineering PLC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.