Correlation Between AB Volvo and Embellence Group
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Embellence Group 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 Embellence Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Embellence Group AB, you can compare the effects of market volatilities on AB Volvo and Embellence Group 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 Embellence Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Embellence Group.
Diversification Opportunities for AB Volvo and Embellence Group
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VOLV-A and Embellence is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Embellence Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embellence 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 Embellence Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embellence Group has no effect on the direction of AB Volvo i.e., AB Volvo and Embellence Group go up and down completely randomly.
Pair Corralation between AB Volvo and Embellence Group
Assuming the 90 days trading horizon AB Volvo is expected to under-perform the Embellence Group. But the stock apears to be less risky and, when comparing its historical volatility, AB Volvo is 1.21 times less risky than Embellence Group. The stock trades about -0.02 of its potential returns per unit of risk. The Embellence Group AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,080 in Embellence Group AB on August 30, 2024 and sell it today you would lose (100.00) from holding Embellence Group AB or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. Embellence Group AB
Performance |
| Timeline |
| AB Volvo |
| Embellence Group |
AB Volvo and Embellence Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and Embellence Group
The main advantage of trading using opposite AB Volvo and Embellence Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Embellence Group 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 Embellence Group will offset losses from the drop in Embellence Group's long position.The idea behind AB Volvo and Embellence Group AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Embellence Group vs. AB Electrolux | Embellence Group vs. Husqvarna AB | Embellence Group vs. Essity AB | Embellence Group vs. Dometic Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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