Correlation Between Volkswagen and Volkswagen

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

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

Diversification Opportunities for Volkswagen and Volkswagen

0.84

Correlation Coefficient

Volkswagen  Volkswagen

Very poor diversification

The 3 months correlation between Volkswagen and Volkswagen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Volkswagen AG VZO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG VZO and Volkswagen 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 Volkswagen AG are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG VZO has no effect on the direction of Volkswagen i.e., Volkswagen and Volkswagen go up and down completely randomly.

Pair Corralation between Volkswagen and Volkswagen

Assuming the 90 days horizon Volkswagen AG is expected to generate 1.35 times more return on investment than Volkswagen. However, Volkswagen is 1.35 times more volatile than Volkswagen AG VZO. It trades about -0.03 of its potential returns per unit of risk. Volkswagen AG VZO is currently generating about -0.08 per unit of risk. If you would invest  14,976  in Volkswagen AG on January 30, 2024 and sell it today you would lose (205.00) from holding Volkswagen AG or give up 1.37% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Volkswagen AG VZO

Volkswagen AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Volkswagen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Volkswagen AG VZO

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Volkswagen and Volkswagen

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

The idea behind Volkswagen AG and Volkswagen AG VZO 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.