Correlation Between VOLVO B and Traton SE

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

By analyzing existing cross correlation between VOLVO B UNSPADR and Traton SE, you can compare the effects of market volatilities on VOLVO B and Traton SE 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 B with a short position of Traton SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLVO B and Traton SE.

Diversification Opportunities for VOLVO B and Traton SE

0.94

Correlation Coefficient

VOLVO B  Traton SE

Almost no diversification

The 3 months correlation between VOLVO and Traton is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding VOLVO B UNSPADR and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE and VOLVO B 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 B UNSPADR are associated (or correlated) with Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of VOLVO B i.e., VOLVO B and Traton SE go up and down completely randomly.

Pair Corralation between VOLVO B and Traton SE

Assuming the 90 days trading horizon VOLVO B UNSPADR is expected to generate 0.7 times more return on investment than Traton SE. However, VOLVO B UNSPADR is 1.43 times less risky than Traton SE. It trades about 0.16 of its potential returns per unit of risk. Traton SE is currently generating about 0.09 per unit of risk. If you would invest  2,300  in VOLVO B UNSPADR on December 29, 2024 and sell it today you would earn a total of  480.00  from holding VOLVO B UNSPADR or generate 20.87% return on investment over 90 days.

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

VOLVO B UNSPADR  vs.  Traton SE

VOLVO B UNSPADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VOLVO B UNSPADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, VOLVO B reported solid returns over the last few months and may actually be approaching a breakup point.

Traton SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Traton SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VOLVO B and Traton SE

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

The idea behind VOLVO B UNSPADR and Traton SE 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.