Correlation Between Lion Electric and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Lion Electric 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 Lion Electric and AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Electric Corp and AB Volvo, you can compare the effects of market volatilities on Lion Electric 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 Lion Electric with a short position of AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Electric and AB Volvo.
Diversification Opportunities for Lion Electric and AB Volvo
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lion and VOLAF is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Lion Electric 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 Lion Electric Corp 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 Lion Electric i.e., Lion Electric and AB Volvo go up and down completely randomly.
Pair Corralation between Lion Electric and AB Volvo
Considering the 90-day investment horizon Lion Electric Corp is expected to under-perform the AB Volvo. In addition to that, Lion Electric is 14.06 times more volatile than AB Volvo. It trades about -0.35 of its total potential returns per unit of risk. AB Volvo is currently generating about -0.14 per unit of volatility. If you would invest 2,642 in AB Volvo on August 26, 2024 and sell it today you would lose (66.00) from holding AB Volvo or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Electric Corp vs. AB Volvo
Performance |
| Timeline |
| Lion Electric Corp |
| AB Volvo |
Lion Electric and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Electric and AB Volvo
The main advantage of trading using opposite Lion Electric and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Electric 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.| Lion Electric vs. Xos Inc | Lion Electric vs. Nikola Corp | Lion Electric vs. Wabash National | Lion Electric vs. American Premium Water |
| AB Volvo vs. Volvo AB ADR | AB Volvo vs. Deere Company | AB Volvo vs. Volvo AB ser | AB Volvo vs. Deutsche Post AG |
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 Stocks Directory module to find actively traded stocks across global markets.
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