Correlation Between Indutrade and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Indutrade 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 Indutrade and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Volkswagen AG, you can compare the effects of market volatilities on Indutrade 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 Indutrade with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Volkswagen.
Diversification Opportunities for Indutrade and Volkswagen
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indutrade and Volkswagen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Indutrade 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 Indutrade AB 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 has no effect on the direction of Indutrade i.e., Indutrade and Volkswagen go up and down completely randomly.
Pair Corralation between Indutrade and Volkswagen
Assuming the 90 days trading horizon Indutrade AB is expected to under-perform the Volkswagen. In addition to that, Indutrade is 1.0 times more volatile than Volkswagen AG. It trades about -0.11 of its total potential returns per unit of risk. Volkswagen AG is currently generating about 0.0 per unit of volatility. If you would invest 8,829 in Volkswagen AG on September 12, 2024 and sell it today you would lose (9.00) from holding Volkswagen AG or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indutrade AB vs. Volkswagen AG
Performance |
| Timeline |
| Indutrade AB |
| Volkswagen AG |
Indutrade and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indutrade and Volkswagen
The main advantage of trading using opposite Indutrade and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade 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.| Indutrade vs. Hong Kong Land | Indutrade vs. Neometals | Indutrade vs. Coor Service Management | Indutrade vs. Fidelity Sustainable USD |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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