Correlation Between AstraZeneca PLC and AB Volvo

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

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

Diversification Opportunities for AstraZeneca PLC and AB Volvo

-0.45

Correlation Coefficient

AstraZeneca PLC  AB Volvo

Very good diversification

The 3 months correlation between AstraZeneca and VOLV-A is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC i.e., AstraZeneca PLC and AB Volvo go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and AB Volvo

Assuming the 90 days trading horizon AstraZeneca PLC is expected to under-perform the AB Volvo. In addition to that, AstraZeneca PLC is 1.15 times more volatile than AB Volvo. It trades about -0.18 of its total potential returns per unit of risk. AB Volvo is currently generating about 0.01 per unit of volatility. If you would invest  27,280  in AB Volvo on August 31, 2024 and sell it today you would earn a total of  40.00  from holding AB Volvo or generate 0.15% return on investment over 90 days.

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

AstraZeneca PLC  vs.  AB Volvo

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm 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 somewhat strong essential indicators, AB Volvo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AstraZeneca PLC and AB Volvo

The main advantage of trading using opposite AstraZeneca PLC and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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 AstraZeneca PLC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.