Correlation Between Wabash National and AB Volvo

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

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

Diversification Opportunities for Wabash National and AB Volvo

-0.22

Correlation Coefficient

Wabash National  AB Volvo

Very good diversification

The 3 months correlation between Wabash and VOL3 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo and Wabash National 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 Wabash National are associated (or correlated) with AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Wabash National i.e., Wabash National and AB Volvo go up and down completely randomly.

Pair Corralation between Wabash National and AB Volvo

Assuming the 90 days horizon Wabash National is expected to generate 2.85 times more return on investment than AB Volvo. However, Wabash National is 2.85 times more volatile than AB Volvo. It trades about 0.02 of its potential returns per unit of risk. AB Volvo is currently generating about 0.03 per unit of risk. If you would invest  859.00  in Wabash National on April 22, 2025 and sell it today you would lose (9.00) from holding Wabash National or give up 1.05% of portfolio value over 90 days.

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

Wabash National  vs.  AB Volvo

Wabash National

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wabash National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AB Volvo

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, AB Volvo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wabash National and AB Volvo

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

The idea behind Wabash National and AB Volvo 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.