Correlation Between NCAB and AB Volvo

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

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

Diversification Opportunities for NCAB and AB Volvo

0.19

Correlation Coefficient

NCAB  AB Volvo

Average diversification

The 3 months correlation between NCAB and VOLV-A is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NCAB Group and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and NCAB 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 NCAB Group 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 NCAB i.e., NCAB and AB Volvo go up and down completely randomly.

Pair Corralation between NCAB and AB Volvo

Assuming the 90 days trading horizon NCAB Group is expected to under-perform the AB Volvo. In addition to that, NCAB is 1.75 times more volatile than AB Volvo. It trades about -0.04 of its total potential returns per unit of risk. AB Volvo is currently generating about -0.03 per unit of volatility. If you would invest  27,520  in AB Volvo on September 26, 2024 and sell it today you would lose (760.00) from holding AB Volvo or give up 2.76% of portfolio value over 90 days.

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

NCAB Group  vs.  AB Volvo

NCAB Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

AB Volvo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NCAB and AB Volvo

The main advantage of trading using opposite NCAB and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NCAB 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 NCAB Group 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.