Correlation Between Volkswagen and SITC International

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

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

Diversification Opportunities for Volkswagen and SITC International

-0.36

Correlation Coefficient

Volkswagen  SITC International

Very good diversification

The 3 months correlation between Volkswagen and SITC is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and SITC International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SITC International 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 SITC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SITC International has no effect on the direction of Volkswagen i.e., Volkswagen and SITC International go up and down completely randomly.

Pair Corralation between Volkswagen and SITC International

Assuming the 90 days horizon Volkswagen AG is expected to under-perform the SITC International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 2.11 times less risky than SITC International. The pink sheet trades about -0.29 of its potential returns per unit of risk. The SITC International Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  193.00  in SITC International Holdings on August 10, 2024 and sell it today you would earn a total of  40.00  from holding SITC International Holdings or generate 20.73% return on investment over 90 days.

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

Volkswagen AG  vs.  SITC International Holdings

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.

SITC International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SITC International Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, SITC International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and SITC International

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

The idea behind Volkswagen AG and SITC International Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.