Correlation Between Volvo Car and SSAB AB

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

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

Diversification Opportunities for Volvo Car and SSAB AB

0.1

Correlation Coefficient

Volvo Car  SSAB AB

Average diversification

The 3 months correlation between Volvo and SSAB is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Volvo Car AB and SSAB AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB and Volvo Car 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 Car AB are associated (or correlated) with SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB has no effect on the direction of Volvo Car i.e., Volvo Car and SSAB AB go up and down completely randomly.

Pair Corralation between Volvo Car and SSAB AB

Assuming the 90 days trading horizon Volvo Car AB is expected to generate 1.91 times more return on investment than SSAB AB. However, Volvo Car is 1.91 times more volatile than SSAB AB. It trades about -0.01 of its potential returns per unit of risk. SSAB AB is currently generating about -0.09 per unit of risk. If you would invest  2,936  in Volvo Car AB on October 7, 2024 and sell it today you would lose (595.00) from holding Volvo Car AB or give up 20.27% of portfolio value over 90 days.

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

Volvo Car AB  vs.  SSAB AB

Volvo Car AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volvo Car AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Volvo Car is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SSAB AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSAB AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Volvo Car and SSAB AB

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

The idea behind Volvo Car AB and SSAB AB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.