Correlation Between AB Volvo and TF Bank
Can any of the company-specific risk be diversified away by investing in both AB Volvo and TF Bank 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 TF Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and TF Bank AB, you can compare the effects of market volatilities on AB Volvo and TF Bank 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 TF Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and TF Bank.
Diversification Opportunities for AB Volvo and TF Bank
Poor diversification
The 3 months correlation between VOLV-B and TFBANK is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank 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 TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of AB Volvo i.e., AB Volvo and TF Bank go up and down completely randomly.
Pair Corralation between AB Volvo and TF Bank
Assuming the 90 days trading horizon AB Volvo is expected to generate 1.07 times more return on investment than TF Bank. However, AB Volvo is 1.07 times more volatile than TF Bank AB. It trades about -0.1 of its potential returns per unit of risk. TF Bank AB is currently generating about -0.12 per unit of risk. If you would invest 27,980 in AB Volvo on August 28, 2024 and sell it today you would lose (1,010) from holding AB Volvo or give up 3.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB Volvo vs. TF Bank AB
Performance |
| Timeline |
| AB Volvo |
| TF Bank AB |
AB Volvo and TF Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB Volvo and TF Bank
The main advantage of trading using opposite AB Volvo and TF Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, TF Bank 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 TF Bank will offset losses from the drop in TF Bank'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 |
| TF Bank vs. Creades AB | TF Bank vs. L E Lundbergfretagen | TF Bank vs. Industrivarden AB ser | TF Bank vs. Investment AB Latour |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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