Correlation Between Techtronic Industries and Epiroc AB

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

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

Diversification Opportunities for Techtronic Industries and Epiroc AB

-0.08

Correlation Coefficient

Techtronic Industries  Epiroc AB

Good diversification

The 3 months correlation between Techtronic and Epiroc is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Techtronic Industries Ltd and Epiroc AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epiroc AB and Techtronic Industries 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 Techtronic Industries Ltd are associated (or correlated) with Epiroc AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epiroc AB has no effect on the direction of Techtronic Industries i.e., Techtronic Industries and Epiroc AB go up and down completely randomly.

Pair Corralation between Techtronic Industries and Epiroc AB

Assuming the 90 days horizon Techtronic Industries Ltd is expected to under-perform the Epiroc AB. In addition to that, Techtronic Industries is 1.1 times more volatile than Epiroc AB. It trades about -0.06 of its total potential returns per unit of risk. Epiroc AB is currently generating about 0.15 per unit of volatility. If you would invest  1,744  in Epiroc AB on December 30, 2024 and sell it today you would earn a total of  302.00  from holding Epiroc AB or generate 17.32% return on investment over 90 days.

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

Techtronic Industries Ltd  vs.  Epiroc AB

Techtronic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Techtronic Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Epiroc AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Epiroc AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, Epiroc AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Techtronic Industries and Epiroc AB

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

The idea behind Techtronic Industries Ltd and Epiroc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.