Correlation Between British American and Volkswagen
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Volkswagen AG Non Vtg, you can compare the effects of market volatilities on British American 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 British American with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Volkswagen.
Diversification Opportunities for British American and Volkswagen
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and Volkswagen is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Volkswagen AG Non Vtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Non and British American 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 British American Tobacco 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 Non has no effect on the direction of British American i.e., British American and Volkswagen go up and down completely randomly.
Pair Corralation between British American and Volkswagen
Assuming the 90 days trading horizon British American Tobacco is expected to generate 1.44 times more return on investment than Volkswagen. However, British American is 1.44 times more volatile than Volkswagen AG Non Vtg. It trades about 0.02 of its potential returns per unit of risk. Volkswagen AG Non Vtg is currently generating about -0.01 per unit of risk. If you would invest 3,228 in British American Tobacco on October 11, 2024 and sell it today you would earn a total of 421.00 from holding British American Tobacco or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
British American Tobacco vs. Volkswagen AG Non Vtg
Performance |
| Timeline |
| British American Tobacco |
| Volkswagen AG Non |
British American and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Volkswagen
The main advantage of trading using opposite British American and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Panther Metals PLC | British American vs. Cornish Metals | British American vs. Futura Medical | British American vs. Lundin Mining Corp |
| Volkswagen vs. British American Tobacco | Volkswagen vs. Jupiter Fund Management | Volkswagen vs. Odfjell Drilling | Volkswagen vs. Software Circle plc |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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