Correlation Between AB Volvo and Getinge AB

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

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

Diversification Opportunities for AB Volvo and Getinge AB

0.6

Correlation Coefficient

AB Volvo  Getinge AB

Poor diversification

The 3 months correlation between VOLV-B and Getinge is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Getinge AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Getinge AB ser 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 Getinge AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Getinge AB ser has no effect on the direction of AB Volvo i.e., AB Volvo and Getinge AB go up and down completely randomly.

Pair Corralation between AB Volvo and Getinge AB

Assuming the 90 days trading horizon AB Volvo is expected to generate 1.63 times less return on investment than Getinge AB. In addition to that, AB Volvo is 1.17 times more volatile than Getinge AB ser. It trades about 0.1 of its total potential returns per unit of risk. Getinge AB ser is currently generating about 0.2 per unit of volatility. If you would invest  18,155  in Getinge AB ser on December 30, 2024 and sell it today you would earn a total of  3,985  from holding Getinge AB ser or generate 21.95% 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.  Getinge AB ser

AB Volvo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, AB Volvo sustained solid returns over the last few months and may actually be approaching a breakup point.

Getinge AB ser

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Getinge AB ser are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Getinge AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AB Volvo and Getinge AB

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

The idea behind AB Volvo and Getinge AB ser 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.