Correlation Between Volvo AB and Hino Motors
Can any of the company-specific risk be diversified away by investing in both Volvo AB and Hino Motors 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 Hino Motors 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 Hino Motors Ltd, you can compare the effects of market volatilities on Volvo AB and Hino Motors 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 Hino Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volvo AB and Hino Motors.
Diversification Opportunities for Volvo AB and Hino Motors
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Volvo and Hino is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB ADR and Hino Motors Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hino Motors 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 Hino Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hino Motors has no effect on the direction of Volvo AB i.e., Volvo AB and Hino Motors go up and down completely randomly.
Pair Corralation between Volvo AB and Hino Motors
Assuming the 90 days horizon Volvo AB ADR is expected to generate 0.83 times more return on investment than Hino Motors. However, Volvo AB ADR is 1.2 times less risky than Hino Motors. It trades about 0.06 of its potential returns per unit of risk. Hino Motors Ltd is currently generating about -0.05 per unit of risk. If you would invest 1,849 in Volvo AB ADR on August 31, 2024 and sell it today you would earn a total of 629.00 from holding Volvo AB ADR or generate 34.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Volvo AB ADR vs. Hino Motors Ltd
Performance |
| Timeline |
| Volvo AB ADR |
| Hino Motors |
Volvo AB and Hino Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volvo AB and Hino Motors
The main advantage of trading using opposite Volvo AB and Hino Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volvo AB position performs unexpectedly, Hino Motors 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 Hino Motors will offset losses from the drop in Hino Motors' long position.| Volvo AB vs. AB Volvo | Volvo AB vs. Deere Company | Volvo AB vs. Hino Motors Ltd | Volvo AB vs. Daimler Truck Holding |
| Hino Motors vs. Volkswagen AG 110 | Hino Motors vs. Stellantis NV | Hino Motors vs. Toyota Motor | Hino Motors vs. Honda Motor Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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