Correlation Between AB Volvo and Wabash National

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

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

Diversification Opportunities for AB Volvo and Wabash National

-0.53

Correlation Coefficient

AB Volvo  Wabash National

Excellent diversification

The 3 months correlation between VOLAF and Wabash is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of AB Volvo i.e., AB Volvo and Wabash National go up and down completely randomly.

Pair Corralation between AB Volvo and Wabash National

Assuming the 90 days horizon AB Volvo is expected to under-perform the Wabash National. But the pink sheet apears to be less risky and, when comparing its historical volatility, AB Volvo is 2.68 times less risky than Wabash National. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Wabash National is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,941  in Wabash National on September 14, 2024 and sell it today you would earn a total of  5.00  from holding Wabash National or generate 0.26% 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.  Wabash National

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

Wabash National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AB Volvo and Wabash National

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

The idea behind AB Volvo and Wabash National 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.