Correlation Between Deutsche Post and Volvo AB

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

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

Diversification Opportunities for Deutsche Post and Volvo AB

0.33

Correlation Coefficient

Deutsche Post  Volvo AB

Weak diversification

The 3 months correlation between Deutsche and Volvo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Post AG and Volvo AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ser and Deutsche Post 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 Deutsche Post AG 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 ser has no effect on the direction of Deutsche Post i.e., Deutsche Post and Volvo AB go up and down completely randomly.

Pair Corralation between Deutsche Post and Volvo AB

Assuming the 90 days horizon Deutsche Post AG is expected to under-perform the Volvo AB. But the pink sheet apears to be less risky and, when comparing its historical volatility, Deutsche Post AG is 1.08 times less risky than Volvo AB. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Volvo AB ser is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,510  in Volvo AB ser on September 15, 2024 and sell it today you would earn a total of  120.00  from holding Volvo AB ser or generate 4.78% return on investment over 90 days.

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

Deutsche Post AG  vs.  Volvo AB ser

Deutsche Post AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Post AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Volvo AB ser

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Volvo AB ser are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Volvo AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Post and Volvo AB

The main advantage of trading using opposite Deutsche Post and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Post 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 Deutsche Post AG and Volvo AB ser 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.