Correlation Between AB Volvo and SkiStar AB

Can any of the company-specific risk be diversified away by investing in both AB Volvo and SkiStar 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 SkiStar 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 SkiStar AB, you can compare the effects of market volatilities on AB Volvo and SkiStar 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 SkiStar AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and SkiStar AB.

Diversification Opportunities for AB Volvo and SkiStar AB

0.64

Correlation Coefficient

AB Volvo  SkiStar AB

Poor diversification

The 3 months correlation between VOLV-B and SkiStar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and SkiStar AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkiStar AB 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 SkiStar AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkiStar AB has no effect on the direction of AB Volvo i.e., AB Volvo and SkiStar AB go up and down completely randomly.

Pair Corralation between AB Volvo and SkiStar AB

Assuming the 90 days trading horizon AB Volvo is expected to under-perform the SkiStar AB. In addition to that, AB Volvo is 1.38 times more volatile than SkiStar AB. It trades about -0.05 of its total potential returns per unit of risk. SkiStar AB is currently generating about 0.1 per unit of volatility. If you would invest  16,410  in SkiStar AB on September 1, 2024 and sell it today you would earn a total of  390.00  from holding SkiStar AB or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

AB Volvo  vs.  SkiStar AB

AB Volvo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, AB Volvo is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SkiStar AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SkiStar AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, SkiStar AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AB Volvo and SkiStar AB

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

The idea behind AB Volvo and SkiStar 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..