Correlation Between Metso Outotec and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Metso Outotec 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 Metso Outotec and AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metso Outotec Oyj and AB Volvo, you can compare the effects of market volatilities on Metso Outotec 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 Metso Outotec with a short position of AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metso Outotec and AB Volvo.
Diversification Opportunities for Metso Outotec and AB Volvo
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Metso and VOL1 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Metso Outotec Oyj and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Metso Outotec 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 Metso Outotec Oyj 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 Metso Outotec i.e., Metso Outotec and AB Volvo go up and down completely randomly.
Pair Corralation between Metso Outotec and AB Volvo
Assuming the 90 days horizon Metso Outotec is expected to generate 205.92 times less return on investment than AB Volvo. But when comparing it to its historical volatility, Metso Outotec Oyj is 1.6 times less risky than AB Volvo. It trades about 0.0 of its potential returns per unit of risk. AB Volvo is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,393 in AB Volvo on September 2, 2024 and sell it today you would earn a total of 954.00 from holding AB Volvo or generate 68.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metso Outotec Oyj vs. AB Volvo
Performance |
| Timeline |
| Metso Outotec Oyj |
| AB Volvo |
Metso Outotec and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metso Outotec and AB Volvo
The main advantage of trading using opposite Metso Outotec and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metso Outotec 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.| Metso Outotec vs. SPORT LISBOA E | Metso Outotec vs. Columbia Sportswear | Metso Outotec vs. BII Railway Transportation | Metso Outotec vs. Sumitomo Mitsui Construction |
| AB Volvo vs. Flutter Entertainment PLC | AB Volvo vs. Natural Health Trends | AB Volvo vs. ATRYS HEALTH SA | AB Volvo vs. Live Nation Entertainment |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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