Correlation Between AB Volvo and Profoto Holding
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Profoto Holding 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 Profoto Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Profoto Holding AB, you can compare the effects of market volatilities on AB Volvo and Profoto Holding 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 Profoto Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Profoto Holding.
Diversification Opportunities for AB Volvo and Profoto Holding
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VOLV-B and Profoto is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Profoto Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profoto Holding 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 Profoto Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profoto Holding AB has no effect on the direction of AB Volvo i.e., AB Volvo and Profoto Holding go up and down completely randomly.
Pair Corralation between AB Volvo and Profoto Holding
Assuming the 90 days trading horizon AB Volvo is expected to generate 1.04 times more return on investment than Profoto Holding. However, AB Volvo is 1.04 times more volatile than Profoto Holding AB. It trades about 0.27 of its potential returns per unit of risk. Profoto Holding AB is currently generating about 0.01 per unit of risk. If you would invest 27,920 in AB Volvo on November 11, 2024 and sell it today you would earn a total of 3,190 from holding AB Volvo or generate 11.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. Profoto Holding AB
Performance |
| Timeline |
| AB Volvo |
| Profoto Holding AB |
AB Volvo and Profoto Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and Profoto Holding
The main advantage of trading using opposite AB Volvo and Profoto Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Profoto Holding 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 Profoto Holding will offset losses from the drop in Profoto Holding'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 |
| Profoto Holding vs. OptiCept Technologies AB | Profoto Holding vs. Sdiptech AB | Profoto Holding vs. Havsfrun Investment AB | Profoto Holding vs. SaltX Technology Holding |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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