Correlation Between VOLVO B and AB Volvo

Can any of the company-specific risk be diversified away by investing in both VOLVO B 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 VOLVO B and AB Volvo 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 AB Volvo, you can compare the effects of market volatilities on VOLVO B 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 VOLVO B with a short position of AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLVO B and AB Volvo.

Diversification Opportunities for VOLVO B and AB Volvo

0.91

Correlation Coefficient

VOLVO B  AB Volvo

Almost no diversification

The 3 months correlation between VOLVO and VOL1 is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding VOLVO B UNSPADR and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 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 VOLVO B i.e., VOLVO B and AB Volvo go up and down completely randomly.

Pair Corralation between VOLVO B and AB Volvo

Assuming the 90 days trading horizon VOLVO B UNSPADR is expected to under-perform the AB Volvo. In addition to that, VOLVO B is 1.15 times more volatile than AB Volvo. It trades about -0.03 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  2,379  in AB Volvo on September 1, 2024 and sell it today you would lose (32.00) from holding AB Volvo or give up 1.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

VOLVO B UNSPADR  vs.  AB Volvo

VOLVO B UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOLVO B UNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, VOLVO B is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VOLVO B and AB Volvo

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

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.