Correlation Between Wabash National and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Wabash National and AB Volvo 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 Wabash National and AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wabash National and AB Volvo, you can compare the effects of market volatilities on Wabash National and AB Volvo 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 Wabash National with a short position of AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and AB Volvo.
Diversification Opportunities for Wabash National and AB Volvo
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wabash and VOLAF is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Wabash National 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 Wabash National are associated (or correlated) with AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Wabash National i.e., Wabash National and AB Volvo go up and down completely randomly.
Pair Corralation between Wabash National and AB Volvo
Considering the 90-day investment horizon Wabash National is expected to generate 2.88 times more return on investment than AB Volvo. However, Wabash National is 2.88 times more volatile than AB Volvo. It trades about 0.29 of its potential returns per unit of risk. AB Volvo is currently generating about -0.22 per unit of risk. If you would invest 1,745 in Wabash National on September 2, 2024 and sell it today you would earn a total of 238.00 from holding Wabash National or generate 13.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wabash National vs. AB Volvo
Performance |
| Timeline |
| Wabash National |
| AB Volvo |
Wabash National and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wabash National and AB Volvo
The main advantage of trading using opposite Wabash National and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wabash National position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo's long position.| Wabash National vs. Rev Group | Wabash National vs. Gencor Industries | Wabash National vs. Alamo Group | Wabash National vs. Columbus McKinnon |
| AB Volvo vs. American Premium Water | AB Volvo vs. Arts Way Manufacturing Co | AB Volvo vs. Astec Industries | AB Volvo vs. Alamo Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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