Correlation Between Volvo AB and Lonking Holdings
Can any of the company-specific risk be diversified away by investing in both Volvo AB and Lonking Holdings 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 Lonking Holdings 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 Lonking Holdings Ltd, you can compare the effects of market volatilities on Volvo AB and Lonking Holdings 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 Lonking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volvo AB and Lonking Holdings.
Diversification Opportunities for Volvo AB and Lonking Holdings
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Volvo and Lonking is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB ADR and Lonking Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonking Holdings 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 Lonking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonking Holdings has no effect on the direction of Volvo AB i.e., Volvo AB and Lonking Holdings go up and down completely randomly.
Pair Corralation between Volvo AB and Lonking Holdings
Assuming the 90 days horizon Volvo AB ADR is expected to generate 0.69 times more return on investment than Lonking Holdings. However, Volvo AB ADR is 1.44 times less risky than Lonking Holdings. It trades about -0.01 of its potential returns per unit of risk. Lonking Holdings Ltd is currently generating about -0.18 per unit of risk. If you would invest 2,554 in Volvo AB ADR on September 5, 2024 and sell it today you would lose (27.00) from holding Volvo AB ADR or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Volvo AB ADR vs. Lonking Holdings Ltd
Performance |
| Timeline |
| Volvo AB ADR |
| Lonking Holdings |
Volvo AB and Lonking Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volvo AB and Lonking Holdings
The main advantage of trading using opposite Volvo AB and Lonking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volvo AB position performs unexpectedly, Lonking Holdings 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 Lonking Holdings will offset losses from the drop in Lonking Holdings' long position.| Volvo AB vs. AB Volvo | Volvo AB vs. Deere Company | Volvo AB vs. Hino Motors Ltd | Volvo AB vs. Daimler Truck Holding |
| Lonking Holdings vs. Volvo AB ADR | Lonking Holdings vs. Deere Company | Lonking Holdings vs. Deutsche Post AG | Lonking Holdings vs. VINCI SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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