Correlation Between AB Volvo and Klaria Pharma

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

By analyzing existing cross correlation between AB Volvo and Klaria Pharma Holding, you can compare the effects of market volatilities on AB Volvo and Klaria Pharma 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 Klaria Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Klaria Pharma.

Diversification Opportunities for AB Volvo and Klaria Pharma

-0.57

Correlation Coefficient

AB Volvo  Klaria Pharma

Excellent diversification

The 3 months correlation between VOLV-A and Klaria is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Klaria Pharma Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klaria Pharma Holding 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 Klaria Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klaria Pharma Holding has no effect on the direction of AB Volvo i.e., AB Volvo and Klaria Pharma go up and down completely randomly.

Pair Corralation between AB Volvo and Klaria Pharma

Assuming the 90 days trading horizon AB Volvo is expected to generate 0.17 times more return on investment than Klaria Pharma. However, AB Volvo is 6.0 times less risky than Klaria Pharma. It trades about 0.12 of its potential returns per unit of risk. Klaria Pharma Holding is currently generating about -0.09 per unit of risk. If you would invest  25,780  in AB Volvo on September 14, 2024 and sell it today you would earn a total of  2,600  from holding AB Volvo or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AB Volvo  vs.  Klaria Pharma Holding

AB Volvo

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, AB Volvo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Klaria Pharma Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klaria Pharma Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AB Volvo and Klaria Pharma

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

The idea behind AB Volvo and Klaria Pharma Holding 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.