Correlation Between Autoliv and Fox Factory

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

By analyzing existing cross correlation between Autoliv and Fox Factory Holding, you can compare the effects of market volatilities on Autoliv and Fox Factory 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 Fox Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autoliv and Fox Factory.

Diversification Opportunities for Autoliv and Fox Factory

-0.46

Correlation Coefficient

Autoliv  Fox Factory

Very good diversification

The 3 months correlation between Autoliv and Fox is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Fox Factory Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Factory Holding 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 Fox Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Factory Holding has no effect on the direction of Autoliv i.e., Autoliv and Fox Factory go up and down completely randomly.

Pair Corralation between Autoliv and Fox Factory

Considering the 90-day investment horizon Autoliv is expected to generate 0.71 times more return on investment than Fox Factory. However, Autoliv is 1.4 times less risky than Fox Factory. It trades about 0.01 of its potential returns per unit of risk. Fox Factory Holding is currently generating about -0.11 per unit of risk. If you would invest  9,915  in Autoliv on September 1, 2024 and sell it today you would lose (3.00) from holding Autoliv or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Autoliv  vs.  Fox Factory Holding

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.

Fox Factory Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fox Factory Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Autoliv and Fox Factory

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

The idea behind Autoliv and Fox Factory Holding 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.