Correlation Between Volkswagen and Marks
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Marks 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 Marks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Marks and Spencer, you can compare the effects of market volatilities on Volkswagen and Marks 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 Marks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Marks.
Diversification Opportunities for Volkswagen and Marks
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Volkswagen and Marks is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of Volkswagen i.e., Volkswagen and Marks go up and down completely randomly.
Pair Corralation between Volkswagen and Marks
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Marks. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.13 times less risky than Marks. The stock trades about -0.04 of its potential returns per unit of risk. The Marks and Spencer is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 14,690 in Marks and Spencer on October 14, 2024 and sell it today you would earn a total of 18,810 from holding Marks and Spencer or generate 128.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Marks and Spencer
Performance |
| Timeline |
| Volkswagen AG |
| Marks and Spencer |
Volkswagen and Marks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Marks
The main advantage of trading using opposite Volkswagen and Marks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Marks 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 Marks will offset losses from the drop in Marks' long position.| Volkswagen vs. Atalaya Mining | Volkswagen vs. Coeur Mining | Volkswagen vs. Europa Metals | Volkswagen vs. Martin Marietta Materials |
| Marks vs. Atresmedia | Marks vs. Cairo Communication SpA | Marks vs. Zinc Media Group | Marks vs. Gaming Realms plc |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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