Correlation Between AB Volvo and Shyft

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

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

Diversification Opportunities for AB Volvo and Shyft

0.09

Correlation Coefficient

AB Volvo  Shyft

Significant diversification

The 3 months correlation between VOL3 and Shyft is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and The Shyft Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyft Group and AB Volvo 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 AB Volvo are associated (or correlated) with Shyft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyft Group has no effect on the direction of AB Volvo i.e., AB Volvo and Shyft go up and down completely randomly.

Pair Corralation between AB Volvo and Shyft

Assuming the 90 days trading horizon AB Volvo is expected to generate 0.15 times more return on investment than Shyft. However, AB Volvo is 6.56 times less risky than Shyft. It trades about -0.57 of its potential returns per unit of risk. The Shyft Group is currently generating about -0.18 per unit of risk. If you would invest  2,502  in AB Volvo on October 7, 2024 and sell it today you would lose (156.00) from holding AB Volvo or give up 6.24% of portfolio value over 90 days.

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

AB Volvo  vs.  The Shyft Group

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 nearly stable essential indicators, AB Volvo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shyft Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Shyft Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Shyft is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AB Volvo and Shyft

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

The idea behind AB Volvo and The Shyft Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.