Correlation Between Stanley Black and Snap On

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

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

Diversification Opportunities for Stanley Black and Snap On

0.47

Correlation Coefficient

Stanley Black  Snap On

Very weak diversification

The 3 months correlation between Stanley and Snap is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Stanley Black Decker and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On and Stanley Black 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 Stanley Black Decker are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Stanley Black i.e., Stanley Black and Snap On go up and down completely randomly.

Pair Corralation between Stanley Black and Snap On

Considering the 90-day investment horizon Stanley Black Decker is expected to generate 1.22 times more return on investment than Snap On. However, Stanley Black is 1.22 times more volatile than Snap On. It trades about -0.08 of its potential returns per unit of risk. Snap On is currently generating about -0.15 per unit of risk. If you would invest  9,040  in Stanley Black Decker on November 28, 2024 and sell it today you would lose (261.00) from holding Stanley Black Decker or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Stanley Black Decker  vs.  Snap On

Stanley Black Decker

Risk-Adjusted Performance

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 quite persistent basic indicators, Stanley Black is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Snap On

Risk-Adjusted Performance

Very Weak

Over the last 90 days Snap On has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Stanley Black and Snap On

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

The idea behind Stanley Black Decker and Snap On 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 Transaction History module to view history of all your transactions and understand their impact on performance.