Correlation Between Hyster Yale and Volvo AB

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

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

Diversification Opportunities for Hyster Yale and Volvo AB

0.46

Correlation Coefficient

Hyster Yale  Volvo AB

Very weak diversification

The 3 months correlation between Hyster and Volvo is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hyster Yale Materials Handling and Volvo AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ADR and Hyster Yale 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 Hyster Yale Materials Handling 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 ADR has no effect on the direction of Hyster Yale i.e., Hyster Yale and Volvo AB go up and down completely randomly.

Pair Corralation between Hyster Yale and Volvo AB

Allowing for the 90-day total investment horizon Hyster Yale Materials Handling is expected to under-perform the Volvo AB. In addition to that, Hyster Yale is 1.73 times more volatile than Volvo AB ADR. It trades about -0.1 of its total potential returns per unit of risk. Volvo AB ADR is currently generating about -0.05 per unit of volatility. If you would invest  2,576  in Volvo AB ADR on September 21, 2024 and sell it today you would lose (141.00) from holding Volvo AB ADR or give up 5.47% of portfolio value over 90 days.

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

Hyster Yale Materials Handling  vs.  Volvo AB ADR

Hyster Yale Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyster Yale Materials Handling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Volvo AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volvo AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Volvo AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hyster Yale and Volvo AB

The main advantage of trading using opposite Hyster Yale and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyster Yale 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 Hyster Yale Materials Handling and Volvo AB ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.