Correlation Between Autoliv and Workhorse

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

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

Diversification Opportunities for Autoliv and Workhorse

0.7

Correlation Coefficient

Autoliv  Workhorse

Poor diversification

The 3 months correlation between Autoliv and Workhorse is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Workhorse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workhorse Group 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 Workhorse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workhorse Group has no effect on the direction of Autoliv i.e., Autoliv and Workhorse go up and down completely randomly.

Pair Corralation between Autoliv and Workhorse

Considering the 90-day investment horizon Autoliv is expected to generate 12.38 times less return on investment than Workhorse. But when comparing it to its historical volatility, Autoliv is 4.98 times less risky than Workhorse. It trades about 0.05 of its potential returns per unit of risk. Workhorse Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Workhorse Group on September 12, 2024 and sell it today you would earn a total of  45.00  from holding Workhorse Group or generate 73.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Autoliv  vs.  Workhorse Group

Autoliv

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Autoliv may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Workhorse Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autoliv and Workhorse

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

The idea behind Autoliv and Workhorse Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.