Correlation Between Enter Air and AB Volvo

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

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

Diversification Opportunities for Enter Air and AB Volvo

0.24

Correlation Coefficient

Enter Air  AB Volvo

Modest diversification

The 3 months correlation between Enter and VOL1 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Enter Air 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 Enter Air SA are associated (or correlated) with AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Enter Air i.e., Enter Air and AB Volvo go up and down completely randomly.

Pair Corralation between Enter Air and AB Volvo

Assuming the 90 days trading horizon Enter Air SA is expected to generate 3.02 times more return on investment than AB Volvo. However, Enter Air is 3.02 times more volatile than AB Volvo. It trades about 0.02 of its potential returns per unit of risk. AB Volvo is currently generating about 0.0 per unit of risk. If you would invest  1,230  in Enter Air SA on September 3, 2024 and sell it today you would lose (18.00) from holding Enter Air SA or give up 1.46% of portfolio value over 90 days.

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

Enter Air SA  vs.  AB Volvo

Enter Air SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enter Air SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enter Air is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AB Volvo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Enter Air and AB Volvo

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

The idea behind Enter Air SA and AB Volvo 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.