Correlation Between AB Volvo and Hino Motors

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

By analyzing existing cross correlation between AB Volvo and Hino Motors Ltd, you can compare the effects of market volatilities on AB Volvo and Hino Motors 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 Hino Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Hino Motors.

Diversification Opportunities for AB Volvo and Hino Motors

-0.76

Correlation Coefficient

AB Volvo  Hino Motors

Pay attention - limited upside

The 3 months correlation between VOLAF and Hino is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Hino Motors Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hino Motors 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 Hino Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hino Motors has no effect on the direction of AB Volvo i.e., AB Volvo and Hino Motors go up and down completely randomly.

Pair Corralation between AB Volvo and Hino Motors

Assuming the 90 days horizon AB Volvo is expected to generate 1.26 times more return on investment than Hino Motors. However, AB Volvo is 1.26 times more volatile than Hino Motors Ltd. It trades about 0.09 of its potential returns per unit of risk. Hino Motors Ltd is currently generating about 0.02 per unit of risk. If you would invest  2,576  in AB Volvo on December 25, 2024 and sell it today you would earn a total of  508.00  from holding AB Volvo or generate 19.72% return on investment over 90 days.

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

AB Volvo  vs.  Hino Motors Ltd

AB Volvo

Risk-Adjusted Performance

OK

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

Hino Motors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hino Motors Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hino Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AB Volvo and Hino Motors

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

The idea behind AB Volvo and Hino Motors Ltd 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.