Correlation Between AB Volvo and PACCAR
Can any of the company-specific risk be diversified away by investing in both AB Volvo and PACCAR 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 PACCAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and PACCAR Inc, you can compare the effects of market volatilities on AB Volvo and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and PACCAR.
Diversification Opportunities for AB Volvo and PACCAR
Very good diversification
The 3 months correlation between VOLAF and PACCAR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of AB Volvo i.e., AB Volvo and PACCAR go up and down completely randomly.
Pair Corralation between AB Volvo and PACCAR
Assuming the 90 days horizon AB Volvo is expected to generate 2.26 times more return on investment than PACCAR. However, AB Volvo is 2.26 times more volatile than PACCAR Inc. It trades about 0.09 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.04 per unit of risk. If you would invest 2,576 in AB Volvo on December 27, 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 | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
AB Volvo vs. PACCAR Inc
Performance |
Timeline |
AB Volvo |
PACCAR Inc |
AB Volvo and PACCAR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AB Volvo and PACCAR
The main advantage of trading using opposite AB Volvo and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.AB Volvo vs. Volvo AB ADR | AB Volvo vs. Deere Company | AB Volvo vs. Volvo AB ser | AB Volvo vs. Deutsche Post AG |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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