Correlation Between United States and Volkswagen
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Volkswagen AG Non Vtg, you can compare the effects of market volatilities on United States 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 United States with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Volkswagen.
Diversification Opportunities for United States and Volkswagen
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Volkswagen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Volkswagen go up and down completely randomly.
Pair Corralation between United States and Volkswagen
Assuming the 90 days trading horizon United States Steel is expected to under-perform the Volkswagen. In addition to that, United States is 1.85 times more volatile than Volkswagen AG Non Vtg. It trades about -0.02 of its total potential returns per unit of risk. Volkswagen AG Non Vtg is currently generating about 0.01 per unit of volatility. If you would invest 10,997 in Volkswagen AG Non Vtg on December 11, 2024 and sell it today you would earn a total of 38.00 from holding Volkswagen AG Non Vtg or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.89% |
| Values | Daily Returns |
United States Steel vs. Volkswagen AG Non Vtg
Performance |
| Timeline |
| United States Steel |
| Volkswagen AG Non |
United States and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Volkswagen
The main advantage of trading using opposite United States and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Ecclesiastical Insurance Office | ||
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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