Correlation Between Epiroc AB and Volvo AB
Can any of the company-specific risk be diversified away by investing in both Epiroc AB 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 Epiroc AB and Volvo AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epiroc AB and Volvo AB ser, you can compare the effects of market volatilities on Epiroc AB 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 Epiroc AB with a short position of Volvo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epiroc AB and Volvo AB.
Diversification Opportunities for Epiroc AB and Volvo AB
Poor diversification
The 3 months correlation between Epiroc and Volvo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Epiroc AB and Volvo AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ser and Epiroc 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 Epiroc AB 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 ser has no effect on the direction of Epiroc AB i.e., Epiroc AB and Volvo AB go up and down completely randomly.
Pair Corralation between Epiroc AB and Volvo AB
Assuming the 90 days horizon Epiroc AB is expected to generate 6.62 times less return on investment than Volvo AB. But when comparing it to its historical volatility, Epiroc AB is 1.35 times less risky than Volvo AB. It trades about 0.01 of its potential returns per unit of risk. Volvo AB ser is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,793 in Volvo AB ser on September 2, 2024 and sell it today you would earn a total of 714.00 from holding Volvo AB ser or generate 39.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.28% |
| Values | Daily Returns |
Epiroc AB vs. Volvo AB ser
Performance |
| Timeline |
| Epiroc AB |
| Volvo AB ser |
Epiroc AB and Volvo AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epiroc AB and Volvo AB
The main advantage of trading using opposite Epiroc AB and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epiroc AB 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.| Epiroc AB vs. Caterpillar | Epiroc AB vs. AGCO Corporation | Epiroc AB vs. Nikola Corp | Epiroc AB vs. PACCAR Inc |
| Volvo AB vs. Daimler Truck Holding | Volvo AB vs. Oshkosh | Volvo AB vs. Hydrofarm Holdings Group | Volvo AB vs. Hino Motors Ltd |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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