Correlation Between Avanza Bank and Autoliv

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

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

Diversification Opportunities for Avanza Bank and Autoliv

-0.67

Correlation Coefficient

Avanza Bank  Autoliv

Excellent diversification

The 3 months correlation between Avanza and Autoliv is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Avanza Bank Holding and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Avanza Bank 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 Avanza Bank Holding are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Avanza Bank i.e., Avanza Bank and Autoliv go up and down completely randomly.

Pair Corralation between Avanza Bank and Autoliv

Assuming the 90 days trading horizon Avanza Bank is expected to generate 2.1 times less return on investment than Autoliv. In addition to that, Avanza Bank is 1.18 times more volatile than Autoliv. It trades about 0.02 of its total potential returns per unit of risk. Autoliv is currently generating about 0.05 per unit of volatility. If you would invest  78,704  in Autoliv on September 4, 2024 and sell it today you would earn a total of  30,096  from holding Autoliv or generate 38.24% return on investment over 90 days.

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

Avanza Bank Holding  vs.  Autoliv

Avanza Bank Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avanza Bank Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Avanza Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Autoliv

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Autoliv may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Avanza Bank and Autoliv

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

The idea behind Avanza Bank Holding and Autoliv 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.