Correlation Between Daimler Truck and VOLVO B

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

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

Diversification Opportunities for Daimler Truck and VOLVO B

0.85

Correlation Coefficient

Daimler Truck  VOLVO B

Very poor diversification

The 3 months correlation between Daimler and VOLVO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Daimler Truck Holding and VOLVO B UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLVO B UNSPADR and Daimler Truck 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 Daimler Truck Holding are associated (or correlated) with VOLVO B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLVO B UNSPADR has no effect on the direction of Daimler Truck i.e., Daimler Truck and VOLVO B go up and down completely randomly.

Pair Corralation between Daimler Truck and VOLVO B

Assuming the 90 days trading horizon Daimler Truck is expected to generate 1.7 times less return on investment than VOLVO B. In addition to that, Daimler Truck is 1.25 times more volatile than VOLVO B UNSPADR. It trades about 0.14 of its total potential returns per unit of risk. VOLVO B UNSPADR is currently generating about 0.29 per unit of volatility. If you would invest  2,300  in VOLVO B UNSPADR on December 1, 2024 and sell it today you would earn a total of  720.00  from holding VOLVO B UNSPADR or generate 31.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Daimler Truck Holding  vs.  VOLVO B UNSPADR

Daimler Truck Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daimler Truck Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Daimler Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

VOLVO B UNSPADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VOLVO B UNSPADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, VOLVO B reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daimler Truck and VOLVO B

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

The idea behind Daimler Truck Holding and VOLVO B UNSPADR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..