Correlation Between Bayerische Motoren and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Bayerische Motoren 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 Bayerische Motoren and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayerische Motoren Werke and Volkswagen AG VZO, you can compare the effects of market volatilities on Bayerische Motoren 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 Bayerische Motoren with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Volkswagen.
Diversification Opportunities for Bayerische Motoren and Volkswagen
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bayerische and Volkswagen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Volkswagen AG VZO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG VZO and Bayerische Motoren 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 Bayerische Motoren Werke 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 VZO has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Volkswagen go up and down completely randomly.
Pair Corralation between Bayerische Motoren and Volkswagen
Assuming the 90 days horizon Bayerische Motoren Werke is expected to generate 1.15 times more return on investment than Volkswagen. However, Bayerische Motoren is 1.15 times more volatile than Volkswagen AG VZO. It trades about -0.26 of its potential returns per unit of risk. Volkswagen AG VZO is currently generating about -0.33 per unit of risk. If you would invest 2,713 in Bayerische Motoren Werke on August 29, 2024 and sell it today you would lose (357.00) from holding Bayerische Motoren Werke or give up 13.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayerische Motoren Werke vs. Volkswagen AG VZO
Performance |
| Timeline |
| Bayerische Motoren Werke |
| Volkswagen AG VZO |
Bayerische Motoren and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayerische Motoren and Volkswagen
The main advantage of trading using opposite Bayerische Motoren and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren 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.| Bayerische Motoren vs. Mercedes Benz Group AG | Bayerische Motoren vs. Porsche Automobile Holding | Bayerische Motoren vs. Volkswagen AG 110 | Bayerische Motoren vs. Mercedes Benz Group AG |
| Volkswagen vs. Volkswagen AG Pref | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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