Correlation Between Oshkosh and Volvo AB

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

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

Diversification Opportunities for Oshkosh and Volvo AB

0.22

Correlation Coefficient

Oshkosh  Volvo AB

Modest diversification

The 3 months correlation between Oshkosh and Volvo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Oshkosh 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 Oshkosh 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 Oshkosh 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 Oshkosh i.e., Oshkosh and Volvo AB go up and down completely randomly.

Pair Corralation between Oshkosh and Volvo AB

Considering the 90-day investment horizon Oshkosh is expected to under-perform the Volvo AB. In addition to that, Oshkosh is 1.07 times more volatile than Volvo AB ser. It trades about -0.05 of its total potential returns per unit of risk. Volvo AB ser is currently generating about -0.03 per unit of volatility. If you would invest  2,605  in Volvo AB ser on October 20, 2024 and sell it today you would lose (125.00) from holding Volvo AB ser or give up 4.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Oshkosh  vs.  Volvo AB ser

Oshkosh

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oshkosh has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Volvo AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volvo AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Oshkosh and Volvo AB

The main advantage of trading using opposite Oshkosh and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oshkosh 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 Oshkosh 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..