Correlation Between VINCI SA and Volvo AB

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

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

Diversification Opportunities for VINCI SA and Volvo AB

0.51

Correlation Coefficient

VINCI SA  Volvo AB

Very weak diversification

The 3 months correlation between VINCI and Volvo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding VINCI SA and Volvo AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ADR and VINCI SA 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 VINCI SA are associated (or correlated) with Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ADR has no effect on the direction of VINCI SA i.e., VINCI SA and Volvo AB go up and down completely randomly.

Pair Corralation between VINCI SA and Volvo AB

Assuming the 90 days horizon VINCI SA is expected to under-perform the Volvo AB. In addition to that, VINCI SA is 1.37 times more volatile than Volvo AB ADR. It trades about -0.02 of its total potential returns per unit of risk. Volvo AB ADR is currently generating about 0.02 per unit of volatility. If you would invest  2,505  in Volvo AB ADR on September 5, 2024 and sell it today you would earn a total of  22.00  from holding Volvo AB ADR or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

VINCI SA  vs.  Volvo AB ADR

VINCI SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VINCI SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VINCI SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Volvo AB ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Volvo AB ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Volvo AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VINCI SA and Volvo AB

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

The idea behind VINCI SA and Volvo AB ADR 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 Global Correlations module to find global opportunities by holding instruments from different markets.