Correlation Between Techtronic Industries and AB SKF

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

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

Diversification Opportunities for Techtronic Industries and AB SKF

0.71

Correlation Coefficient

Techtronic Industries  AB SKF

Poor diversification

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

Pair Corralation between Techtronic Industries and AB SKF

Assuming the 90 days trading horizon Techtronic Industries is expected to generate 1.73 times less return on investment than AB SKF. In addition to that, Techtronic Industries is 1.19 times more volatile than AB SKF. It trades about 0.1 of its total potential returns per unit of risk. AB SKF is currently generating about 0.2 per unit of volatility. If you would invest  1,620  in AB SKF on April 23, 2025 and sell it today you would earn a total of  420.00  from holding AB SKF or generate 25.93% return on investment over 90 days.

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

Techtronic Industries  vs.  AB SKF

Techtronic Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Techtronic Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Techtronic Industries reported solid returns over the last few months and may actually be approaching a breakup point.

AB SKF

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, AB SKF reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Techtronic Industries and AB SKF

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

The idea behind Techtronic Industries and AB SKF 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.