Correlation Between Volvo AB and NP3 Fastigheter

Can any of the company-specific risk be diversified away by investing in both Volvo AB and NP3 Fastigheter 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 Volvo AB and NP3 Fastigheter into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Volvo AB Series and NP3 Fastigheter AB, you can compare the effects of market volatilities on Volvo AB and NP3 Fastigheter 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 Volvo AB with a short position of NP3 Fastigheter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volvo AB and NP3 Fastigheter.

Diversification Opportunities for Volvo AB and NP3 Fastigheter

0.63

Correlation Coefficient

Volvo AB  NP3 Fastigheter

Poor diversification

The 3 months correlation between Volvo and NP3 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB Series and NP3 Fastigheter AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NP3 Fastigheter AB and Volvo AB 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 Volvo AB Series are associated (or correlated) with NP3 Fastigheter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NP3 Fastigheter AB has no effect on the direction of Volvo AB i.e., Volvo AB and NP3 Fastigheter go up and down completely randomly.

Pair Corralation between Volvo AB and NP3 Fastigheter

Assuming the 90 days trading horizon Volvo AB is expected to generate 2.18 times less return on investment than NP3 Fastigheter. But when comparing it to its historical volatility, Volvo AB Series is 1.09 times less risky than NP3 Fastigheter. It trades about 0.04 of its potential returns per unit of risk. NP3 Fastigheter AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  24,426  in NP3 Fastigheter AB on April 22, 2025 and sell it today you would earn a total of  2,024  from holding NP3 Fastigheter AB or generate 8.29% return on investment over 90 days.

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

Volvo AB Series  vs.  NP3 Fastigheter AB

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 3 (%) 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.

NP3 Fastigheter AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NP3 Fastigheter AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NP3 Fastigheter may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Volvo AB and NP3 Fastigheter

The main advantage of trading using opposite Volvo AB and NP3 Fastigheter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volvo AB position performs unexpectedly, NP3 Fastigheter 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 NP3 Fastigheter will offset losses from the drop in NP3 Fastigheter's long position.

The idea behind Volvo AB Series and NP3 Fastigheter 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.