Correlation Between H M and Autoliv

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

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

Diversification Opportunities for H M and Autoliv

0.14

Correlation Coefficient

H M  Autoliv

Average diversification

The 3 months correlation between HM-B and Autoliv is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and H M 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 H M Hennes are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of H M i.e., H M and Autoliv go up and down completely randomly.

Pair Corralation between H M and Autoliv

Assuming the 90 days trading horizon H M Hennes is expected to under-perform the Autoliv. But the stock apears to be less risky and, when comparing its historical volatility, H M Hennes is 1.03 times less risky than Autoliv. The stock trades about -0.03 of its potential returns per unit of risk. The Autoliv is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  107,236  in Autoliv on November 29, 2024 and sell it today you would lose (2,316) from holding Autoliv or give up 2.16% of portfolio value over 90 days.

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

H M Hennes  vs.  Autoliv

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, H M is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Autoliv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Autoliv is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with H M and Autoliv

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

The idea behind H M Hennes and Autoliv 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.