Correlation Between Atlas Copco and Husqvarna

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Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Husqvarna 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 Atlas Copco and Husqvarna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas Copco AB and Husqvarna AB, you can compare the effects of market volatilities on Atlas Copco and Husqvarna 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 Atlas Copco with a short position of Husqvarna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Husqvarna.

Diversification Opportunities for Atlas Copco and Husqvarna

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Atlas and Husqvarna is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Husqvarna AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husqvarna AB and Atlas Copco 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 Atlas Copco AB are associated (or correlated) with Husqvarna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husqvarna AB has no effect on the direction of Atlas Copco i.e., Atlas Copco and Husqvarna go up and down completely randomly.

Pair Corralation between Atlas Copco and Husqvarna

Assuming the 90 days trading horizon Atlas Copco is expected to generate 1.11 times less return on investment than Husqvarna. But when comparing it to its historical volatility, Atlas Copco AB is 1.03 times less risky than Husqvarna. It trades about 0.12 of its potential returns per unit of risk. Husqvarna AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,887  in Husqvarna AB on February 5, 2024 and sell it today you would earn a total of  777.00  from holding Husqvarna AB or generate 9.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Atlas Copco AB  vs.  Husqvarna AB

 Performance 
       Timeline  
Atlas Copco AB 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Atlas Copco sustained solid returns over the last few months and may actually be approaching a breakup point.
Husqvarna AB 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Husqvarna AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Husqvarna may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Atlas Copco and Husqvarna Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Atlas Copco and Husqvarna

The main advantage of trading using opposite Atlas Copco and Husqvarna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, Husqvarna 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 Husqvarna will offset losses from the drop in Husqvarna's long position.
The idea behind Atlas Copco AB and Husqvarna 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.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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