Correlation Between Associated British and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Volkswagen AG, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Volkswagen.
Diversification Opportunities for Associated British and Volkswagen
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Associated and Volkswagen is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Volkswagen go up and down completely randomly.
Pair Corralation between Associated British and Volkswagen
Assuming the 90 days trading horizon Associated British Foods is expected to generate 0.9 times more return on investment than Volkswagen. However, Associated British Foods is 1.11 times less risky than Volkswagen. It trades about 0.0 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of risk. If you would invest 2,707 in Associated British Foods on September 12, 2024 and sell it today you would lose (24.00) from holding Associated British Foods or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Associated British Foods vs. Volkswagen AG
Performance |
| Timeline |
| Associated British Foods |
| Volkswagen AG |
Associated British and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Volkswagen
The main advantage of trading using opposite Associated British and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. ALIOR BANK | Associated British vs. National Bank Holdings | Associated British vs. BE Semiconductor Industries | Associated British vs. Commonwealth Bank of |
| Volkswagen vs. HF FOODS GRP | Volkswagen vs. LION ONE METALS | Volkswagen vs. Associated British Foods | Volkswagen vs. Lifeway Foods |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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