Correlation Between AB Volvo and Fenix Outdoor

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

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

Diversification Opportunities for AB Volvo and Fenix Outdoor

-0.01

Correlation Coefficient

AB Volvo  Fenix Outdoor

Good diversification

The 3 months correlation between VOLV-A and Fenix is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Fenix Outdoor International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fenix Outdoor Intern 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 Fenix Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fenix Outdoor Intern has no effect on the direction of AB Volvo i.e., AB Volvo and Fenix Outdoor go up and down completely randomly.

Pair Corralation between AB Volvo and Fenix Outdoor

Assuming the 90 days trading horizon AB Volvo is expected to generate 0.91 times more return on investment than Fenix Outdoor. However, AB Volvo is 1.09 times less risky than Fenix Outdoor. It trades about 0.19 of its potential returns per unit of risk. Fenix Outdoor International is currently generating about 0.01 per unit of risk. If you would invest  27,760  in AB Volvo on December 1, 2024 and sell it today you would earn a total of  5,420  from holding AB Volvo or generate 19.52% return on investment over 90 days.

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

AB Volvo  vs.  Fenix Outdoor International

AB Volvo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, AB Volvo sustained solid returns over the last few months and may actually be approaching a breakup point.

Fenix Outdoor Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fenix Outdoor International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fenix Outdoor is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AB Volvo and Fenix Outdoor

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

The idea behind AB Volvo and Fenix Outdoor International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.