Correlation Between Volkswagen and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Hon Hai 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 Hon Hai 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 Hon Hai Precision, you can compare the effects of market volatilities on Volkswagen and Hon Hai 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 Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Hon Hai.
Diversification Opportunities for Volkswagen and Hon Hai
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Volkswagen and Hon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Non Vtg and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision 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 Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of Volkswagen i.e., Volkswagen and Hon Hai go up and down completely randomly.
Pair Corralation between Volkswagen and Hon Hai
Assuming the 90 days trading horizon Volkswagen AG Non Vtg is expected to generate 0.99 times more return on investment than Hon Hai. However, Volkswagen AG Non Vtg is 1.01 times less risky than Hon Hai. It trades about 0.14 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.22 per unit of risk. If you would invest 8,610 in Volkswagen AG Non Vtg on October 12, 2024 and sell it today you would earn a total of 368.00 from holding Volkswagen AG Non Vtg or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG Non Vtg vs. Hon Hai Precision
Performance |
| Timeline |
| Volkswagen AG Non |
| Hon Hai Precision |
Volkswagen and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Hon Hai
The main advantage of trading using opposite Volkswagen and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| Volkswagen vs. DFS Furniture PLC | Volkswagen vs. Atalaya Mining | Volkswagen vs. Panther Metals PLC | Volkswagen vs. Cornish Metals |
| Hon Hai vs. Panther Metals PLC | Hon Hai vs. Rheinmetall AG | Hon Hai vs. Various Eateries PLC | Hon Hai vs. Adriatic Metals |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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