Volva said that it had created the cloud-based system to alleviate the growing number of cycling-related collisions and deaths occurring due to more bicycles on the roads.
It aims to make road users better aware of each other by sharing location information and sending alerts when vehicles get too close.
"The partnership between Volvo Cars, POC and Ericsson is an important milestone in investigating the next steps towards Volvo Cars' vision to build cars that will not crash," said Volvo vice president Klas Bendrik.
"But now, by exploring cloud-based safety systems, we are getting ever closer to eliminating the remaining blind spots between cars and cyclists and by that avoid collisions."
A cyclist's position is shared with a Volvo driver through the brand's cloud system using smartphone cycling apps such as Strava, and vice versa.
The cyclist will be warned of vehicles via a helmet-mounted light and the car driver is notified of the rider's proximity using a "head-up" display alert, projected onto the windscreen.
If a collision is imminent, both parties are warned using these visual cues so they can take evasive action to prevent an accident.
The system is designed to be particularly useful when visibility becomes an issue; in poor lighting conditions or on bendy roads.
"Our mission is to do the best we can to possibly save lives and to reduce the consequences of accidents for gravity sports athletes and cyclists," said POC CEO Stefan Ytterborn.
"The partnership with Volvo Cars aligns very well with our mission and we are excited to see how we can contribute to cyclist safety and increase interaction between cars and cyclists alike."
The project builds on Volvo Cars' City Safety system: a technology integrated into the brand's new XC90 model that can detect, warn and auto-brake to avoid collisions with cyclists.
The helmet will be launched at the International Consumer Electronics Show (CES) in Las Vegas, taking place from 6 to 9 January 2015.