Correlation Between AB Volvo and Metso Outotec
Can any of the company-specific risk be diversified away by investing in both AB Volvo and Metso Outotec 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 AB Volvo and Metso Outotec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Metso Outotec Oyj, you can compare the effects of market volatilities on AB Volvo and Metso Outotec 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 AB Volvo with a short position of Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Metso Outotec.
Diversification Opportunities for AB Volvo and Metso Outotec
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between VOL1 and Metso is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj and AB Volvo 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 AB Volvo are associated (or correlated) with Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of AB Volvo i.e., AB Volvo and Metso Outotec go up and down completely randomly.
Pair Corralation between AB Volvo and Metso Outotec
Assuming the 90 days trading horizon AB Volvo is expected to generate 1.49 times more return on investment than Metso Outotec. However, AB Volvo is 1.49 times more volatile than Metso Outotec Oyj. It trades about 0.09 of its potential returns per unit of risk. Metso Outotec Oyj is currently generating about 0.01 per unit of risk. If you would invest 683.00 in AB Volvo on September 23, 2024 and sell it today you would earn a total of 1,627 from holding AB Volvo or generate 238.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
AB Volvo vs. Metso Outotec Oyj
Performance |
Timeline |
AB Volvo |
Metso Outotec Oyj |
AB Volvo and Metso Outotec Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AB Volvo and Metso Outotec
The main advantage of trading using opposite AB Volvo and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Metso Outotec 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 Metso Outotec will offset losses from the drop in Metso Outotec's long position.AB Volvo vs. Caterpillar | AB Volvo vs. Caterpillar | AB Volvo vs. Deere Company | AB Volvo vs. VOLVO B UNSPADR |
Metso Outotec vs. Caterpillar | Metso Outotec vs. Caterpillar | Metso Outotec vs. Deere Company | Metso Outotec vs. AB Volvo |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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