Correlation Between Atlas Copco and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and AB Volvo 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 Atlas Copco and AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas Copco AB and AB Volvo, you can compare the effects of market volatilities on Atlas Copco and AB Volvo 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 Atlas Copco with a short position of AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and AB Volvo.
Diversification Opportunities for Atlas Copco and AB Volvo
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Atlas and VOLV-B is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Atlas Copco 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 Atlas Copco AB are associated (or correlated) with AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Atlas Copco i.e., Atlas Copco and AB Volvo go up and down completely randomly.
Pair Corralation between Atlas Copco and AB Volvo
Assuming the 90 days trading horizon Atlas Copco AB is expected to under-perform the AB Volvo. But the stock apears to be less risky and, when comparing its historical volatility, Atlas Copco AB is 1.1 times less risky than AB Volvo. The stock trades about -0.17 of its potential returns per unit of risk. The AB Volvo is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 27,980 in AB Volvo on August 29, 2024 and sell it today you would lose (1,220) from holding AB Volvo or give up 4.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Copco AB vs. AB Volvo
Performance |
| Timeline |
| Atlas Copco AB |
| AB Volvo |
Atlas Copco and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and AB Volvo
The main advantage of trading using opposite Atlas Copco and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo's long position.| Atlas Copco vs. Sandvik AB | Atlas Copco vs. AB SKF | Atlas Copco vs. Alfa Laval AB | Atlas Copco vs. ASSA ABLOY AB |
| AB Volvo vs. AstraZeneca PLC | AB Volvo vs. H M Hennes | AB Volvo vs. Telefonaktiebolaget LM Ericsson | AB Volvo vs. Investor AB ser |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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