Correlation Between VIRG NATL and Volkswagen
Can any of the company-specific risk be diversified away by investing in both VIRG NATL and Volkswagen 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 VIRG NATL and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VIRG NATL BANKSH and Volkswagen AG, you can compare the effects of market volatilities on VIRG NATL and Volkswagen 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 VIRG NATL with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIRG NATL and Volkswagen.
Diversification Opportunities for VIRG NATL and Volkswagen
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between VIRG and Volkswagen is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and VIRG NATL 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 VIRG NATL BANKSH are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of VIRG NATL i.e., VIRG NATL and Volkswagen go up and down completely randomly.
Pair Corralation between VIRG NATL and Volkswagen
Assuming the 90 days horizon VIRG NATL BANKSH is expected to generate 1.75 times more return on investment than Volkswagen. However, VIRG NATL is 1.75 times more volatile than Volkswagen AG. It trades about 0.04 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.07 per unit of risk. If you would invest 3,266 in VIRG NATL BANKSH on September 4, 2024 and sell it today you would earn a total of 554.00 from holding VIRG NATL BANKSH or generate 16.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VIRG NATL BANKSH vs. Volkswagen AG
Performance |
| Timeline |
| VIRG NATL BANKSH |
| Volkswagen AG |
VIRG NATL and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VIRG NATL and Volkswagen
The main advantage of trading using opposite VIRG NATL and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIRG NATL position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.The idea behind VIRG NATL BANKSH and Volkswagen AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Volkswagen vs. VIRG NATL BANKSH | Volkswagen vs. American Airlines Group | Volkswagen vs. Regions Financial | Volkswagen vs. Ameriprise Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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