Correlation Between AmeraMex International and Volvo AB

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

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

Diversification Opportunities for AmeraMex International and Volvo AB

-0.54

Correlation Coefficient

AmeraMex International  Volvo AB

Excellent diversification

The 3 months correlation between AmeraMex and Volvo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding AmeraMex International and Volvo AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ADR and AmeraMex International 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 AmeraMex International are associated (or correlated) with Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ADR has no effect on the direction of AmeraMex International i.e., AmeraMex International and Volvo AB go up and down completely randomly.

Pair Corralation between AmeraMex International and Volvo AB

Given the investment horizon of 90 days AmeraMex International is expected to generate 5.24 times less return on investment than Volvo AB. In addition to that, AmeraMex International is 2.0 times more volatile than Volvo AB ADR. It trades about 0.02 of its total potential returns per unit of risk. Volvo AB ADR is currently generating about 0.2 per unit of volatility. If you would invest  2,439  in Volvo AB ADR on December 29, 2024 and sell it today you would earn a total of  622.00  from holding Volvo AB ADR or generate 25.5% return on investment over 90 days.

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

AmeraMex International  vs.  Volvo AB ADR

AmeraMex International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmeraMex International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, AmeraMex International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Volvo AB ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volvo AB ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Volvo AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmeraMex International and Volvo AB

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

The idea behind AmeraMex International and Volvo AB ADR 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.