Correlation Between AB Volvo and Orexo AB
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Orexo AB 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 Orexo AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Orexo AB, you can compare the effects of market volatilities on AB Volvo and Orexo AB 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 Orexo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Orexo AB.
Diversification Opportunities for AB Volvo and Orexo AB
Excellent diversification
The 3 months correlation between VOLV-B and Orexo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Orexo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orexo 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 Orexo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orexo AB has no effect on the direction of AB Volvo i.e., AB Volvo and Orexo AB go up and down completely randomly.
Pair Corralation between AB Volvo and Orexo AB
Assuming the 90 days trading horizon AB Volvo is expected to under-perform the Orexo AB. But the stock apears to be less risky and, when comparing its historical volatility, AB Volvo is 3.11 times less risky than Orexo AB. The stock trades about -0.12 of its potential returns per unit of risk. The Orexo AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,100 in Orexo AB on August 29, 2024 and sell it today you would earn a total of 128.00 from holding Orexo AB or generate 11.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. Orexo AB
Performance |
| Timeline |
| AB Volvo |
| Orexo AB |
AB Volvo and Orexo AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and Orexo AB
The main advantage of trading using opposite AB Volvo and Orexo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Orexo AB 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 Orexo AB will offset losses from the drop in Orexo AB's long position.| AB Volvo vs. AstraZeneca PLC | AB Volvo vs. H M Hennes | AB Volvo vs. Telefonaktiebolaget LM Ericsson | AB Volvo vs. Investor AB ser |
| Orexo AB vs. Swedish Orphan Biovitrum | Orexo AB vs. BioInvent International AB | Orexo AB vs. Camurus AB | Orexo AB vs. BioArctic 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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