Correlation Between Overstock and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Overstock 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 Overstock and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overstock and Volkswagen AG, you can compare the effects of market volatilities on Overstock 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 Overstock with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overstock and Volkswagen.
Diversification Opportunities for Overstock and Volkswagen
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Overstock and Volkswagen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Overstock and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Overstock 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 Overstock 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 Overstock i.e., Overstock and Volkswagen go up and down completely randomly.
Pair Corralation between Overstock and Volkswagen
Assuming the 90 days trading horizon Overstock is expected to under-perform the Volkswagen. In addition to that, Overstock is 1.19 times more volatile than Volkswagen AG. It trades about -0.36 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.32 per unit of volatility. If you would invest 9,572 in Volkswagen AG on August 27, 2024 and sell it today you would lose (1,252) from holding Volkswagen AG or give up 13.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Overstock vs. Volkswagen AG
Performance |
| Timeline |
| Overstock |
| Volkswagen AG |
Overstock and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Overstock and Volkswagen
The main advantage of trading using opposite Overstock and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overstock 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.| Overstock vs. Universal Music Group | Overstock vs. Coor Service Management | Overstock vs. Litigation Capital Management | Overstock vs. Lundin Mining Corp |
| Volkswagen vs. Cairo Communication SpA | Volkswagen vs. Verizon Communications | Volkswagen vs. Batm Advanced Communications | Volkswagen vs. Polar Capital Technology |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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