Correlation Between Volkswagen and Axfood AB
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Axfood AB 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 Axfood AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Axfood AB, you can compare the effects of market volatilities on Volkswagen and Axfood AB 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 Axfood AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Axfood AB.
Diversification Opportunities for Volkswagen and Axfood AB
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Volkswagen and Axfood is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Volkswagen i.e., Volkswagen and Axfood AB go up and down completely randomly.
Pair Corralation between Volkswagen and Axfood AB
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 1.4 times more return on investment than Axfood AB. However, Volkswagen is 1.4 times more volatile than Axfood AB. It trades about 0.32 of its potential returns per unit of risk. Axfood AB is currently generating about 0.1 per unit of risk. If you would invest 8,888 in Volkswagen AG on October 25, 2024 and sell it today you would earn a total of 820.00 from holding Volkswagen AG or generate 9.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Axfood AB
Performance |
| Timeline |
| Volkswagen AG |
| Axfood AB |
Volkswagen and Axfood AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Axfood AB
The main advantage of trading using opposite Volkswagen and Axfood AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Axfood AB 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 Axfood AB will offset losses from the drop in Axfood AB's long position.| Volkswagen vs. Golden Metal Resources | Volkswagen vs. Wheaton Precious Metals | Volkswagen vs. Summit Materials Cl | Volkswagen vs. Cornish Metals |
| Axfood AB vs. Jacquet Metal Service | Axfood AB vs. Empire Metals Limited | Axfood AB vs. Liechtensteinische Landesbank AG | Axfood AB vs. Molson Coors Beverage |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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