Correlation Between Volkswagen and Bukit Asam

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

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

Diversification Opportunities for Volkswagen and Bukit Asam

-0.35

Correlation Coefficient

Volkswagen  Bukit Asam

Very good diversification

The 3 months correlation between Volkswagen and Bukit is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and Bukit Asam Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bukit Asam Tbk 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 VZO are associated (or correlated) with Bukit Asam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bukit Asam Tbk has no effect on the direction of Volkswagen i.e., Volkswagen and Bukit Asam go up and down completely randomly.

Pair Corralation between Volkswagen and Bukit Asam

Assuming the 90 days horizon Volkswagen AG VZO is expected to under-perform the Bukit Asam. In addition to that, Volkswagen is 1.63 times more volatile than Bukit Asam Tbk. It trades about -0.03 of its total potential returns per unit of risk. Bukit Asam Tbk is currently generating about 0.07 per unit of volatility. If you would invest  435.00  in Bukit Asam Tbk on July 30, 2024 and sell it today you would earn a total of  34.00  from holding Bukit Asam Tbk or generate 7.82% return on investment over 90 days.

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

Volkswagen AG VZO  vs.  Bukit Asam Tbk

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Bukit Asam Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bukit Asam Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Bukit Asam may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Volkswagen and Bukit Asam

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

The idea behind Volkswagen AG VZO and Bukit Asam Tbk 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.