Correlation Between Volvo AB and Astec Industries
Can any of the company-specific risk be diversified away by investing in both Volvo AB and Astec Industries 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 Volvo AB and Astec Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volvo AB ADR and Astec Industries, you can compare the effects of market volatilities on Volvo AB and Astec Industries 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 Volvo AB with a short position of Astec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volvo AB and Astec Industries.
Diversification Opportunities for Volvo AB and Astec Industries
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Volvo and Astec is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB ADR and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries and Volvo 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 Volvo AB ADR are associated (or correlated) with Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Volvo AB i.e., Volvo AB and Astec Industries go up and down completely randomly.
Pair Corralation between Volvo AB and Astec Industries
Assuming the 90 days horizon Volvo AB ADR is expected to under-perform the Astec Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volvo AB ADR is 1.51 times less risky than Astec Industries. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Astec Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,173 in Astec Industries on August 31, 2024 and sell it today you would earn a total of 661.00 from holding Astec Industries or generate 20.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volvo AB ADR vs. Astec Industries
Performance |
| Timeline |
| Volvo AB ADR |
| Astec Industries |
Volvo AB and Astec Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volvo AB and Astec Industries
The main advantage of trading using opposite Volvo AB and Astec Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volvo AB position performs unexpectedly, Astec Industries 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 Astec Industries will offset losses from the drop in Astec Industries' long position.| Volvo AB vs. AB Volvo | Volvo AB vs. Deere Company | Volvo AB vs. Hino Motors Ltd | Volvo AB vs. Daimler Truck Holding |
| Astec Industries vs. AGCO Corporation | Astec Industries vs. Deere Company | Astec Industries vs. Lindsay | Astec Industries vs. Alamo Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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