Correlation Between Autoliv and Evolution

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

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

Diversification Opportunities for Autoliv and Evolution

0.36

Correlation Coefficient

Autoliv  Evolution

Weak diversification

The 3 months correlation between Autoliv and Evolution is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and Autoliv 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 Autoliv are associated (or correlated) with Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of Autoliv i.e., Autoliv and Evolution go up and down completely randomly.

Pair Corralation between Autoliv and Evolution

Assuming the 90 days trading horizon Autoliv is expected to generate 1.43 times less return on investment than Evolution. In addition to that, Autoliv is 1.36 times more volatile than Evolution AB. It trades about 0.14 of its total potential returns per unit of risk. Evolution AB is currently generating about 0.27 per unit of volatility. If you would invest  65,016  in Evolution AB on May 2, 2025 and sell it today you would earn a total of  22,944  from holding Evolution AB or generate 35.29% return on investment over 90 days.

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

Autoliv  vs.  Evolution AB

Autoliv

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 11 (%) 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.

Evolution AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution AB are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Evolution unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autoliv and Evolution

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

The idea behind Autoliv and Evolution AB 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.