Correlation Between CEA Industries and Volvo AB
Can any of the company-specific risk be diversified away by investing in both CEA Industries and Volvo 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 CEA Industries and Volvo AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEA Industries and Volvo AB ADR, you can compare the effects of market volatilities on CEA Industries and Volvo 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 CEA Industries with a short position of Volvo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEA Industries and Volvo AB.
Diversification Opportunities for CEA Industries and Volvo AB
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CEA and Volvo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Volvo AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ADR and CEA Industries 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 CEA Industries are associated (or correlated) with Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ADR has no effect on the direction of CEA Industries i.e., CEA Industries and Volvo AB go up and down completely randomly.
Pair Corralation between CEA Industries and Volvo AB
Given the investment horizon of 90 days CEA Industries is expected to under-perform the Volvo AB. In addition to that, CEA Industries is 1.54 times more volatile than Volvo AB ADR. It trades about -0.09 of its total potential returns per unit of risk. Volvo AB ADR is currently generating about -0.03 per unit of volatility. If you would invest 2,574 in Volvo AB ADR on August 31, 2024 and sell it today you would lose (110.00) from holding Volvo AB ADR or give up 4.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEA Industries vs. Volvo AB ADR
Performance |
| Timeline |
| CEA Industries |
| Volvo AB ADR |
CEA Industries and Volvo AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEA Industries and Volvo AB
The main advantage of trading using opposite CEA Industries and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEA Industries position performs unexpectedly, Volvo 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 Volvo AB will offset losses from the drop in Volvo AB's long position.| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
| Volvo AB vs. AB Volvo | Volvo AB vs. Deere Company | Volvo AB vs. Hino Motors Ltd | Volvo AB vs. Daimler Truck Holding |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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