Correlation Between Arjo AB and Autoliv

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

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

Diversification Opportunities for Arjo AB and Autoliv

-0.86

Correlation Coefficient

Arjo AB  Autoliv

Pay attention - limited upside

The 3 months correlation between Arjo and Autoliv is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Arjo AB and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Arjo AB 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 Arjo AB are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Arjo AB i.e., Arjo AB and Autoliv go up and down completely randomly.

Pair Corralation between Arjo AB and Autoliv

Assuming the 90 days trading horizon Arjo AB is expected to under-perform the Autoliv. In addition to that, Arjo AB is 1.28 times more volatile than Autoliv. It trades about -0.13 of its total potential returns per unit of risk. Autoliv is currently generating about 0.12 per unit of volatility. If you would invest  95,470  in Autoliv on September 14, 2024 and sell it today you would earn a total of  13,270  from holding Autoliv or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Arjo AB  vs.  Autoliv

Arjo AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arjo AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Autoliv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Autoliv exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arjo AB and Autoliv

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

The idea behind Arjo AB and Autoliv 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.