Correlation Between CSL and Atlas Copco

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

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

Diversification Opportunities for CSL and Atlas Copco

-0.29

Correlation Coefficient

CSL  Atlas Copco

Very good diversification

The 3 months correlation between CSL and Atlas is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and CSL 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 CSL Limited are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of CSL i.e., CSL and Atlas Copco go up and down completely randomly.

Pair Corralation between CSL and Atlas Copco

Assuming the 90 days horizon CSL Limited is expected to generate 1.95 times more return on investment than Atlas Copco. However, CSL is 1.95 times more volatile than Atlas Copco AB. It trades about 0.01 of its potential returns per unit of risk. Atlas Copco AB is currently generating about -0.04 per unit of risk. If you would invest  15,472  in CSL Limited on May 26, 2025 and sell it today you would lose (657.00) from holding CSL Limited or give up 4.25% of portfolio value over 90 days.

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

CSL Limited  vs.  Atlas Copco AB

CSL Limited

Risk-Adjusted Performance

Weakest

Over the last 90 days CSL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, CSL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Atlas Copco AB

Risk-Adjusted Performance

Weakest

Over the last 90 days Atlas Copco AB has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with CSL and Atlas Copco

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

The idea behind CSL Limited and Atlas Copco 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.