Correlation Between AP Mller and Volvo AB

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

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

Diversification Opportunities for AP Mller and Volvo AB

0.35

Correlation Coefficient

AP Mller  Volvo AB

Weak diversification

The 3 months correlation between AMKBF and Volvo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and Volvo AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ser and AP Mller 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 AP Mller 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 ser has no effect on the direction of AP Mller i.e., AP Mller and Volvo AB go up and down completely randomly.

Pair Corralation between AP Mller and Volvo AB

Assuming the 90 days horizon AP Mller is expected to generate 0.79 times more return on investment than Volvo AB. However, AP Mller is 1.26 times less risky than Volvo AB. It trades about 0.12 of its potential returns per unit of risk. Volvo AB ser is currently generating about 0.01 per unit of risk. If you would invest  188,523  in AP Mller on May 15, 2025 and sell it today you would earn a total of  30,477  from holding AP Mller or generate 16.17% return on investment over 90 days.

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

AP Mller   vs.  Volvo AB ser

AP Mller

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, AP Mller reported solid returns over the last few months and may actually be approaching a breakup point.

Volvo AB ser

Risk-Adjusted Performance

Weakest

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

Pair Trading with AP Mller and Volvo AB

The main advantage of trading using opposite AP Mller and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Mller 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 AP Mller and Volvo AB ser 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 Global Correlations module to find global opportunities by holding instruments from different markets.