Correlation Between Vestas Wind and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Vestas Wind and Sandvik 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 Vestas Wind and Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Sandvik AB ADR, you can compare the effects of market volatilities on Vestas Wind and Sandvik 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 Vestas Wind with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Sandvik AB.
Diversification Opportunities for Vestas Wind and Sandvik AB
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vestas and Sandvik is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of Vestas Wind i.e., Vestas Wind and Sandvik AB go up and down completely randomly.
Pair Corralation between Vestas Wind and Sandvik AB
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Sandvik AB. In addition to that, Vestas Wind is 1.52 times more volatile than Sandvik AB ADR. It trades about -0.04 of its total potential returns per unit of risk. Sandvik AB ADR is currently generating about 0.03 per unit of volatility. If you would invest 1,825 in Sandvik AB ADR on December 1, 2024 and sell it today you would earn a total of 332.00 from holding Sandvik AB ADR or generate 18.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
Vestas Wind Systems vs. Sandvik AB ADR
Performance |
Timeline |
Vestas Wind Systems |
Sandvik AB ADR |
Vestas Wind and Sandvik AB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vestas Wind and Sandvik AB
The main advantage of trading using opposite Vestas Wind and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, Sandvik 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.Vestas Wind vs. KONE Oyj | Vestas Wind vs. Spirax Sarco Engineering PLC | Vestas Wind vs. Atlas Copco ADR | Vestas Wind vs. IDEX Corporation |
Sandvik AB vs. Rockwell Automation | Sandvik AB vs. Schneider Electric SA | Sandvik AB vs. Fanuc | Sandvik AB vs. Vestas Wind Systems |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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