Correlation Between Target Corp and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Target Corp 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 Target Corp and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Corp and Volkswagen AG, you can compare the effects of market volatilities on Target Corp 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 Target Corp with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Corp and Volkswagen.
Diversification Opportunities for Target Corp and Volkswagen
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Target and Volkswagen is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Target Corp and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Target Corp 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 Target Corp 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 Target Corp i.e., Target Corp and Volkswagen go up and down completely randomly.
Pair Corralation between Target Corp and Volkswagen
Assuming the 90 days trading horizon Target Corp is expected to generate 3.49 times less return on investment than Volkswagen. In addition to that, Target Corp is 1.22 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 0.45 per unit of volatility. If you would invest 8,910 in Volkswagen AG on November 2, 2024 and sell it today you would earn a total of 1,170 from holding Volkswagen AG or generate 13.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Corp vs. Volkswagen AG
Performance |
| Timeline |
| Target Corp |
| Volkswagen AG |
Target Corp and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Corp and Volkswagen
The main advantage of trading using opposite Target Corp and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Corp 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.| Target Corp vs. Berkshire Hathaway | Target Corp vs. Samsung Electronics Co | Target Corp vs. Samsung Electronics Co | Target Corp vs. Chocoladefabriken Lindt Spruengli |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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