Correlation Between Hino Motors and Volvo AB

Can any of the company-specific risk be diversified away by investing in both Hino Motors 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 Hino Motors and Volvo AB 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 Volvo AB ser, you can compare the effects of market volatilities on Hino Motors 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 Hino Motors with a short position of Volvo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hino Motors and Volvo AB.

Diversification Opportunities for Hino Motors and Volvo AB

0.32

Correlation Coefficient

Hino Motors  Volvo AB

Weak diversification

The 3 months correlation between Hino and Volvo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hino Motors Ltd 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 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 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 Hino Motors i.e., Hino Motors and Volvo AB go up and down completely randomly.

Pair Corralation between Hino Motors and Volvo AB

Assuming the 90 days horizon Hino Motors is expected to generate 1.36 times less return on investment than Volvo AB. But when comparing it to its historical volatility, Hino Motors Ltd is 2.58 times less risky than Volvo AB. It trades about 0.28 of its potential returns per unit of risk. Volvo AB ser is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,490  in Volvo AB ser on September 16, 2024 and sell it today you would earn a total of  140.00  from holding Volvo AB ser or generate 5.62% return on investment over 90 days.

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

Hino Motors Ltd  vs.  Volvo AB ser

Hino Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hino Motors Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Hino Motors and Volvo AB

The main advantage of trading using opposite Hino Motors and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hino Motors 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 Hino Motors Ltd 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.