Correlation Between Prosiebensat and VOLVO B

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

By analyzing existing cross correlation between Prosiebensat 1 Media and VOLVO B UNSPADR, you can compare the effects of market volatilities on Prosiebensat and VOLVO B 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 Prosiebensat with a short position of VOLVO B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosiebensat and VOLVO B.

Diversification Opportunities for Prosiebensat and VOLVO B

0.11

Correlation Coefficient

Prosiebensat  VOLVO B

Average diversification

The 3 months correlation between Prosiebensat and VOLVO is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Prosiebensat 1 Media and VOLVO B UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLVO B UNSPADR and Prosiebensat 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 Prosiebensat 1 Media are associated (or correlated) with VOLVO B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLVO B UNSPADR has no effect on the direction of Prosiebensat i.e., Prosiebensat and VOLVO B go up and down completely randomly.

Pair Corralation between Prosiebensat and VOLVO B

Assuming the 90 days trading horizon Prosiebensat is expected to generate 1.79 times less return on investment than VOLVO B. In addition to that, Prosiebensat is 1.42 times more volatile than VOLVO B UNSPADR. It trades about 0.04 of its total potential returns per unit of risk. VOLVO B UNSPADR is currently generating about 0.11 per unit of volatility. If you would invest  2,180  in VOLVO B UNSPADR on September 12, 2024 and sell it today you would earn a total of  260.00  from holding VOLVO B UNSPADR or generate 11.93% return on investment over 90 days.

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

Prosiebensat 1 Media  vs.  VOLVO B UNSPADR

Prosiebensat 1 Media

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prosiebensat 1 Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Prosiebensat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VOLVO B UNSPADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VOLVO B UNSPADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, VOLVO B may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prosiebensat and VOLVO B

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

The idea behind Prosiebensat 1 Media and VOLVO B UNSPADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .