Correlation Between AB Volvo and Major Drilling
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Major Drilling 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 AB Volvo and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Major Drilling Group, you can compare the effects of market volatilities on AB Volvo and Major Drilling 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 AB Volvo with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Major Drilling.
Diversification Opportunities for AB Volvo and Major Drilling
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VOL3 and Major is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and AB Volvo 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 AB Volvo are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of AB Volvo i.e., AB Volvo and Major Drilling go up and down completely randomly.
Pair Corralation between AB Volvo and Major Drilling
Assuming the 90 days trading horizon AB Volvo is expected to generate 1.41 times more return on investment than Major Drilling. However, AB Volvo is 1.41 times more volatile than Major Drilling Group. It trades about 0.08 of its potential returns per unit of risk. Major Drilling Group is currently generating about 0.0 per unit of risk. If you would invest 1,467 in AB Volvo on September 12, 2024 and sell it today you would earn a total of 1,053 from holding AB Volvo or generate 71.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. Major Drilling Group
Performance |
| Timeline |
| AB Volvo |
| Major Drilling Group |
AB Volvo and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and Major Drilling
The main advantage of trading using opposite AB Volvo and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.| AB Volvo vs. Major Drilling Group | AB Volvo vs. ALIOR BANK | AB Volvo vs. Global Ship Lease | AB Volvo vs. Chiba Bank |
| Major Drilling vs. Focus Home Interactive | Major Drilling vs. Japan Post Insurance | Major Drilling vs. MI Homes | Major Drilling vs. INSURANCE AUST GRP |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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