Correlation Between AB Volvo and Nordic Paper
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Nordic Paper 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 Nordic Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Nordic Paper Holding, you can compare the effects of market volatilities on AB Volvo and Nordic Paper 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 Nordic Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Nordic Paper.
Diversification Opportunities for AB Volvo and Nordic Paper
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VOLV-A and Nordic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Nordic Paper Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Paper Holding 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 Nordic Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Paper Holding has no effect on the direction of AB Volvo i.e., AB Volvo and Nordic Paper go up and down completely randomly.
Pair Corralation between AB Volvo and Nordic Paper
Assuming the 90 days trading horizon AB Volvo is expected to generate 1.49 times less return on investment than Nordic Paper. But when comparing it to its historical volatility, AB Volvo is 1.29 times less risky than Nordic Paper. It trades about 0.06 of its potential returns per unit of risk. Nordic Paper Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,041 in Nordic Paper Holding on September 3, 2024 and sell it today you would earn a total of 1,939 from holding Nordic Paper Holding or generate 63.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. Nordic Paper Holding
Performance |
| Timeline |
| AB Volvo |
| Nordic Paper Holding |
AB Volvo and Nordic Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and Nordic Paper
The main advantage of trading using opposite AB Volvo and Nordic Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Nordic Paper 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 Nordic Paper will offset losses from the drop in Nordic Paper'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 |
| Nordic Paper vs. Rottneros AB | Nordic Paper vs. G5 Entertainment publ | Nordic Paper vs. SSAB AB | Nordic Paper vs. Inwido 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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