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 Pref, 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

0.96

Correlation Coefficient

Volkswagen  Volkswagen

Almost no diversification

The 3 months correlation between Volkswagen and Volkswagen is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Volkswagen AG Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Pref 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 Pref 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 under-perform the Volkswagen. In addition to that, Volkswagen is 1.27 times more volatile than Volkswagen AG Pref. It trades about -0.03 of its total potential returns per unit of risk. Volkswagen AG Pref is currently generating about -0.01 per unit of volatility. If you would invest  1,055  in Volkswagen AG Pref on August 12, 2024 and sell it today you would lose (155.00) from holding Volkswagen AG Pref or give up 14.69% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Volkswagen AG Pref

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Volkswagen AG Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG Pref has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Pref 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..