Correlation Between Atlas Copco and Nidec

Can any of the company-specific risk be diversified away by investing in both Atlas Copco and Nidec 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 Nidec 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 Nidec, you can compare the effects of market volatilities on Atlas Copco and Nidec 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 Nidec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and Nidec.

Diversification Opportunities for Atlas Copco and Nidec

0.64

Correlation Coefficient

Atlas Copco  Nidec

Poor diversification

The 3 months correlation between Atlas and Nidec is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Atlas Copco i.e., Atlas Copco and Nidec go up and down completely randomly.

Pair Corralation between Atlas Copco and Nidec

Assuming the 90 days horizon Atlas Copco AB is expected to generate 0.87 times more return on investment than Nidec. However, Atlas Copco AB is 1.14 times less risky than Nidec. It trades about 0.02 of its potential returns per unit of risk. Nidec is currently generating about -0.08 per unit of risk. If you would invest  1,553  in Atlas Copco AB on January 24, 2025 and sell it today you would earn a total of  17.00  from holding Atlas Copco AB or generate 1.09% return on investment over 90 days.

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

Atlas Copco AB  vs.  Nidec

Atlas Copco AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Atlas Copco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nidec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nidec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Atlas Copco and Nidec

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

The idea behind Atlas Copco AB and Nidec 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.