Correlation Between Volvo AB and Hino Motors

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

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

Diversification Opportunities for Volvo AB and Hino Motors

-0.59

Correlation Coefficient

Volvo AB  Hino Motors

Excellent diversification

The 3 months correlation between Volvo and Hino is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB ser and Hino Motors Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hino Motors and Volvo AB 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 Volvo AB ser are associated (or correlated) with Hino Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hino Motors has no effect on the direction of Volvo AB i.e., Volvo AB and Hino Motors go up and down completely randomly.

Pair Corralation between Volvo AB and Hino Motors

Assuming the 90 days horizon Volvo AB ser is expected to generate 0.71 times more return on investment than Hino Motors. However, Volvo AB ser is 1.42 times less risky than Hino Motors. It trades about 0.18 of its potential returns per unit of risk. Hino Motors Ltd is currently generating about 0.02 per unit of risk. If you would invest  2,490  in Volvo AB ser on December 19, 2024 and sell it today you would earn a total of  625.00  from holding Volvo AB ser or generate 25.1% return on investment over 90 days.

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

Volvo AB ser  vs.  Hino Motors Ltd

Volvo AB ser

Risk-Adjusted Performance

Good

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

Hino Motors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hino Motors Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hino Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Volvo AB and Hino Motors

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

The idea behind Volvo AB ser and Hino Motors Ltd 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.