Correlation Between Hino Motors and AB Volvo

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

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

Diversification Opportunities for Hino Motors and AB Volvo

-0.37

Correlation Coefficient

Hino Motors  AB Volvo

Very good diversification

The 3 months correlation between Hino and VOLAF is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hino Motors Ltd and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Hino Motors 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 Hino Motors Ltd 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 Hino Motors i.e., Hino Motors and AB Volvo go up and down completely randomly.

Pair Corralation between Hino Motors and AB Volvo

Assuming the 90 days horizon Hino Motors is expected to generate 2.17 times less return on investment than AB Volvo. But when comparing it to its historical volatility, Hino Motors Ltd is 1.08 times less risky than AB Volvo. It trades about 0.05 of its potential returns per unit of risk. AB Volvo is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,576  in AB Volvo on December 4, 2024 and sell it today you would earn a total of  508.00  from holding AB Volvo or generate 19.72% return on investment over 90 days.

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

Hino Motors Ltd  vs.  AB Volvo

Hino Motors

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hino Motors Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hino Motors may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AB Volvo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AB Volvo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hino Motors and AB Volvo

The main advantage of trading using opposite Hino Motors and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hino Motors 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 Hino Motors Ltd 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.