Correlation Between Volkswagen and Ford
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG 110 and Ford Motor, you can compare the effects of market volatilities on Volkswagen and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Ford.
Diversification Opportunities for Volkswagen and Ford
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Ford is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 110 are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Volkswagen i.e., Volkswagen and Ford go up and down completely randomly.
Pair Corralation between Volkswagen and Ford
Assuming the 90 days horizon Volkswagen AG 110 is expected to under-perform the Ford. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG 110 is 1.69 times less risky than Ford. The pink sheet trades about -0.43 of its potential returns per unit of risk. The Ford Motor is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 1,341 in Ford Motor on February 6, 2024 and sell it today you would lose (98.00) from holding Ford Motor or give up 7.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Volkswagen AG 110 vs. Ford Motor
Performance |
Timeline |
Volkswagen AG 110 |
Ford Motor |
Volkswagen and Ford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Volkswagen and Ford
The main advantage of trading using opposite Volkswagen and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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