Correlation Between Leading Edge and Volvo AB

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

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

Diversification Opportunities for Leading Edge and Volvo AB

-0.23

Correlation Coefficient

Leading Edge  Volvo AB

Very good diversification

The 3 months correlation between Leading and Volvo is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Volvo AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB Series and Leading Edge 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 Leading Edge Materials 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 Series has no effect on the direction of Leading Edge i.e., Leading Edge and Volvo AB go up and down completely randomly.

Pair Corralation between Leading Edge and Volvo AB

Assuming the 90 days trading horizon Leading Edge Materials is expected to under-perform the Volvo AB. In addition to that, Leading Edge is 3.08 times more volatile than Volvo AB Series. It trades about -0.14 of its total potential returns per unit of risk. Volvo AB Series is currently generating about 0.06 per unit of volatility. If you would invest  25,180  in Volvo AB Series on April 23, 2025 and sell it today you would earn a total of  1,260  from holding Volvo AB Series or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Leading Edge Materials  vs.  Volvo AB Series

Leading Edge Materials

Risk-Adjusted Performance

Very Weak

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

Volvo AB Series

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Volvo AB Series are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Volvo AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Leading Edge and Volvo AB

The main advantage of trading using opposite Leading Edge and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge 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 Leading Edge Materials and Volvo AB Series 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.