Correlation Between AB Volvo and Atlas Copco
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Atlas Copco 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 Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Atlas Copco AB, you can compare the effects of market volatilities on AB Volvo and Atlas Copco 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 Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Atlas Copco.
Diversification Opportunities for AB Volvo and Atlas Copco
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between VOLV-A and Atlas is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB 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 Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of AB Volvo i.e., AB Volvo and Atlas Copco go up and down completely randomly.
Pair Corralation between AB Volvo and Atlas Copco
Assuming the 90 days trading horizon AB Volvo is expected to generate 0.87 times more return on investment than Atlas Copco. However, AB Volvo is 1.15 times less risky than Atlas Copco. It trades about 0.06 of its potential returns per unit of risk. Atlas Copco AB is currently generating about 0.04 per unit of risk. If you would invest 19,005 in AB Volvo on August 25, 2024 and sell it today you would earn a total of 8,295 from holding AB Volvo or generate 43.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. Atlas Copco AB
Performance |
| Timeline |
| AB Volvo |
| Atlas Copco AB |
AB Volvo and Atlas Copco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and Atlas Copco
The main advantage of trading using opposite AB Volvo and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Atlas Copco 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 Atlas Copco will offset losses from the drop in Atlas Copco's long position.| AB Volvo vs. Investor AB ser | AB Volvo vs. Sandvik AB | AB Volvo vs. Svenska Handelsbanken AB | AB Volvo vs. Atlas Copco AB |
| Atlas Copco vs. Sandvik AB | Atlas Copco vs. AB SKF | Atlas Copco vs. Alfa Laval AB | Atlas Copco vs. ASSA ABLOY AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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