Correlation Between Volkswagen and Masco Corp
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Masco Corp 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 Masco Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG Non Vtg and Masco Corp, you can compare the effects of market volatilities on Volkswagen and Masco Corp 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 Masco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Masco Corp.
Diversification Opportunities for Volkswagen and Masco Corp
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Volkswagen and Masco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Non Vtg and Masco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco Corp 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 Non Vtg are associated (or correlated) with Masco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco Corp has no effect on the direction of Volkswagen i.e., Volkswagen and Masco Corp go up and down completely randomly.
Pair Corralation between Volkswagen and Masco Corp
Assuming the 90 days trading horizon Volkswagen AG Non Vtg is expected to generate 1.12 times more return on investment than Masco Corp. However, Volkswagen is 1.12 times more volatile than Masco Corp. It trades about 0.32 of its potential returns per unit of risk. Masco Corp is currently generating about 0.25 per unit of risk. If you would invest 8,641 in Volkswagen AG Non Vtg on October 25, 2024 and sell it today you would earn a total of 737.00 from holding Volkswagen AG Non Vtg or generate 8.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Volkswagen AG Non Vtg vs. Masco Corp
Performance |
| Timeline |
| Volkswagen AG Non |
| Masco Corp |
Volkswagen and Masco Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Masco Corp
The main advantage of trading using opposite Volkswagen and Masco Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Masco Corp 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 Masco Corp will offset losses from the drop in Masco Corp's long position.| Volkswagen vs. Atresmedia | Volkswagen vs. Centaur Media | Volkswagen vs. AcadeMedia AB | Volkswagen vs. G5 Entertainment AB |
| Masco Corp vs. MediaZest plc | Masco Corp vs. Smithson Investment Trust | Masco Corp vs. Edinburgh Investment Trust | Masco Corp vs. Catalyst Media Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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