Correlation Between Autoliv and AMA Group

Can any of the company-specific risk be diversified away by investing in both Autoliv and AMA Group 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 Autoliv and AMA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Autoliv and AMA Group Limited, you can compare the effects of market volatilities on Autoliv and AMA Group 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 Autoliv with a short position of AMA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autoliv and AMA Group.

Diversification Opportunities for Autoliv and AMA Group

0.13

Correlation Coefficient

Autoliv  AMA Group

Average diversification

The 3 months correlation between Autoliv and AMA is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and AMA Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMA Group Limited and Autoliv 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 Autoliv are associated (or correlated) with AMA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMA Group Limited has no effect on the direction of Autoliv i.e., Autoliv and AMA Group go up and down completely randomly.

Pair Corralation between Autoliv and AMA Group

Considering the 90-day investment horizon Autoliv is expected to generate 98.99 times less return on investment than AMA Group. But when comparing it to its historical volatility, Autoliv is 2.21 times less risky than AMA Group. It trades about 0.0 of its potential returns per unit of risk. AMA Group Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3.10  in AMA Group Limited on September 5, 2024 and sell it today you would earn a total of  1.65  from holding AMA Group Limited or generate 53.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Autoliv  vs.  AMA Group Limited

Autoliv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

AMA Group Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMA Group Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AMA Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autoliv and AMA Group

The main advantage of trading using opposite Autoliv and AMA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv position performs unexpectedly, AMA Group 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 AMA Group will offset losses from the drop in AMA Group's long position.

The idea behind Autoliv and AMA Group Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.