Correlation Between Volkswagen and Indutrade
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Indutrade 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 Volkswagen and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Indutrade AB, you can compare the effects of market volatilities on Volkswagen and Indutrade 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 Volkswagen with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Indutrade.
Diversification Opportunities for Volkswagen and Indutrade
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Indutrade is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Volkswagen 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 Volkswagen AG are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Volkswagen i.e., Volkswagen and Indutrade go up and down completely randomly.
Pair Corralation between Volkswagen and Indutrade
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.96 times more return on investment than Indutrade. However, Volkswagen AG is 1.04 times less risky than Indutrade. It trades about 0.2 of its potential returns per unit of risk. Indutrade AB is currently generating about 0.01 per unit of risk. If you would invest 8,920 in Volkswagen AG on October 15, 2024 and sell it today you would earn a total of 420.00 from holding Volkswagen AG or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Indutrade AB
Performance |
| Timeline |
| Volkswagen AG |
| Indutrade AB |
Volkswagen and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Indutrade
The main advantage of trading using opposite Volkswagen and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| Volkswagen vs. Iron Mountain | Volkswagen vs. Celebrus Technologies plc | Volkswagen vs. Aptitude Software Group | Volkswagen vs. Made Tech Group |
| Indutrade vs. Walmart | Indutrade vs. BYD Co | Indutrade vs. Volkswagen AG | Indutrade vs. Volkswagen AG Non Vtg |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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