Correlation Between Austin Engineering and Volvo AB

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

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

Diversification Opportunities for Austin Engineering and Volvo AB

0.22

Correlation Coefficient

Austin Engineering  Volvo AB

Modest diversification

The 3 months correlation between Austin and Volvo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited 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 Austin Engineering 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 Austin Engineering Limited 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 Austin Engineering i.e., Austin Engineering and Volvo AB go up and down completely randomly.

Pair Corralation between Austin Engineering and Volvo AB

If you would invest  30.00  in Austin Engineering Limited on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Austin Engineering Limited or generate 0.0% return on investment over 90 days.

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

Austin Engineering Limited  vs.  Volvo AB ADR

Austin Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Volvo AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volvo AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Volvo AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Austin Engineering and Volvo AB

The main advantage of trading using opposite Austin Engineering and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austin Engineering 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 Austin Engineering Limited 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.

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 CEOs Directory module to screen CEOs from public companies around the world.