Correlation Between VOLKSWAGEN ADR and Tesla

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

By analyzing existing cross correlation between VOLKSWAGEN ADR 110ON and Tesla Inc, you can compare the effects of market volatilities on VOLKSWAGEN ADR and Tesla 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 ADR with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLKSWAGEN ADR and Tesla.

Diversification Opportunities for VOLKSWAGEN ADR and Tesla

0.63

Correlation Coefficient

VOLKSWAGEN ADR  Tesla

Poor diversification

The 3 months correlation between VOLKSWAGEN and Tesla is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN ADR 110ON and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and VOLKSWAGEN ADR 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 ADR 110ON are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of VOLKSWAGEN ADR i.e., VOLKSWAGEN ADR and Tesla go up and down completely randomly.

Pair Corralation between VOLKSWAGEN ADR and Tesla

Assuming the 90 days trading horizon VOLKSWAGEN ADR is expected to generate 9.8 times less return on investment than Tesla. But when comparing it to its historical volatility, VOLKSWAGEN ADR 110ON is 1.61 times less risky than Tesla. It trades about 0.02 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  20,640  in Tesla Inc on April 20, 2025 and sell it today you would earn a total of  7,795  from holding Tesla Inc or generate 37.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

VOLKSWAGEN ADR 110ON  vs.  Tesla Inc

VOLKSWAGEN ADR 110ON

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VOLKSWAGEN ADR 110ON are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VOLKSWAGEN ADR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tesla Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tesla reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VOLKSWAGEN ADR and Tesla

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

The idea behind VOLKSWAGEN ADR 110ON and Tesla Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.