Correlation Between Volvo AB and Alamo
Can any of the company-specific risk be diversified away by investing in both Volvo AB and Alamo 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 Volvo AB and Alamo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volvo AB ADR and Alamo Group, you can compare the effects of market volatilities on Volvo AB and Alamo 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 Volvo AB with a short position of Alamo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volvo AB and Alamo.
Diversification Opportunities for Volvo AB and Alamo
Modest diversification
The 3 months correlation between Volvo and Alamo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB ADR and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and Volvo AB 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 Volvo AB ADR are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Volvo AB i.e., Volvo AB and Alamo go up and down completely randomly.
Pair Corralation between Volvo AB and Alamo
Assuming the 90 days horizon Volvo AB ADR is expected to generate 1.34 times more return on investment than Alamo. However, Volvo AB is 1.34 times more volatile than Alamo Group. It trades about 0.23 of its potential returns per unit of risk. Alamo Group is currently generating about -0.05 per unit of risk. If you would invest 2,435 in Volvo AB ADR on December 18, 2024 and sell it today you would earn a total of 684.00 from holding Volvo AB ADR or generate 28.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.33% |
Values | Daily Returns |
Volvo AB ADR vs. Alamo Group
Performance |
Timeline |
Volvo AB ADR |
Alamo Group |
Volvo AB and Alamo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Volvo AB and Alamo
The main advantage of trading using opposite Volvo AB and Alamo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volvo AB position performs unexpectedly, Alamo 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 Alamo will offset losses from the drop in Alamo's long position.Volvo AB vs. AB Volvo | Volvo AB vs. Deere Company | Volvo AB vs. Hino Motors Ltd | Volvo AB vs. Daimler Truck Holding |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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