Correlation Between AB Volvo and Dios Fastigheter

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

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

Diversification Opportunities for AB Volvo and Dios Fastigheter

-0.21

Correlation Coefficient

AB Volvo  Dios Fastigheter

Very good diversification

The 3 months correlation between VOLV-B and Dios is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Dios Fastigheter AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dios Fastigheter 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 Dios Fastigheter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dios Fastigheter has no effect on the direction of AB Volvo i.e., AB Volvo and Dios Fastigheter go up and down completely randomly.

Pair Corralation between AB Volvo and Dios Fastigheter

Assuming the 90 days trading horizon AB Volvo is expected to generate 1.39 times more return on investment than Dios Fastigheter. However, AB Volvo is 1.39 times more volatile than Dios Fastigheter AB. It trades about 0.22 of its potential returns per unit of risk. Dios Fastigheter AB is currently generating about -0.13 per unit of risk. If you would invest  26,990  in AB Volvo on October 20, 2024 and sell it today you would earn a total of  1,810  from holding AB Volvo or generate 6.71% 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.  Dios Fastigheter AB

AB Volvo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, AB Volvo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dios Fastigheter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dios Fastigheter AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with AB Volvo and Dios Fastigheter

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

The idea behind AB Volvo and Dios Fastigheter 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.