Correlation Between AGCO and Epiroc AB

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

Diversification Opportunities for AGCO and Epiroc AB

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between AGCO and Epiroc is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding AGCO Corp. and Epiroc AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epiroc AB and AGCO 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 AGCO Corporation 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 AGCO i.e., AGCO and Epiroc AB go up and down completely randomly.

Pair Corralation between AGCO and Epiroc AB

Given the investment horizon of 90 days AGCO is expected to generate 1.64 times less return on investment than Epiroc AB. But when comparing it to its historical volatility, AGCO Corporation is 1.06 times less risky than Epiroc AB. It trades about 0.01 of its potential returns per unit of risk. Epiroc AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,927  in Epiroc AB on December 29, 2023 and sell it today you would lose (4.00) from holding Epiroc AB or give up 0.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.78%
ValuesDaily Returns

AGCO Corp.  vs.  Epiroc AB

 Performance 
       Timeline  
AGCO 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGCO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Epiroc AB 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Epiroc AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Epiroc AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

AGCO and Epiroc AB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AGCO and Epiroc AB

The main advantage of trading using opposite AGCO and Epiroc AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGCO 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 AGCO Corporation 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.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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