Correlation Between AB Volvo and Sprint Bioscience

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

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

Diversification Opportunities for AB Volvo and Sprint Bioscience

0.69

Correlation Coefficient

AB Volvo  Sprint Bioscience

Poor diversification

The 3 months correlation between VOLV-A and Sprint is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Sprint Bioscience AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprint Bioscience 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 Sprint Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprint Bioscience has no effect on the direction of AB Volvo i.e., AB Volvo and Sprint Bioscience go up and down completely randomly.

Pair Corralation between AB Volvo and Sprint Bioscience

Assuming the 90 days trading horizon AB Volvo is expected to generate 55.95 times less return on investment than Sprint Bioscience. But when comparing it to its historical volatility, AB Volvo is 3.56 times less risky than Sprint Bioscience. It trades about 0.01 of its potential returns per unit of risk. Sprint Bioscience AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Sprint Bioscience AB on August 31, 2024 and sell it today you would earn a total of  53.00  from holding Sprint Bioscience AB or generate 40.46% return on investment over 90 days.

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

AB Volvo  vs.  Sprint Bioscience AB

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 somewhat strong essential indicators, AB Volvo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sprint Bioscience

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprint Bioscience AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Sprint Bioscience sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AB Volvo and Sprint Bioscience

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

The idea behind AB Volvo and Sprint Bioscience 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.