Correlation Between Strategic Investments and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Strategic Investments 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 Strategic Investments and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Investments AS and Volkswagen AG, you can compare the effects of market volatilities on Strategic Investments 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 Strategic Investments with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Investments and Volkswagen.
Diversification Opportunities for Strategic Investments and Volkswagen
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Strategic and Volkswagen is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Strategic Investments 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 Strategic Investments AS 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 Strategic Investments i.e., Strategic Investments and Volkswagen go up and down completely randomly.
Pair Corralation between Strategic Investments and Volkswagen
Assuming the 90 days horizon Strategic Investments AS is expected to generate 2.77 times more return on investment than Volkswagen. However, Strategic Investments is 2.77 times more volatile than Volkswagen AG. It trades about 0.02 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.47 per unit of risk. If you would invest 14.00 in Strategic Investments AS on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Strategic Investments AS or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Strategic Investments AS vs. Volkswagen AG
Performance |
| Timeline |
| Strategic Investments |
| Volkswagen AG |
Strategic Investments and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Investments and Volkswagen
The main advantage of trading using opposite Strategic Investments and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments 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.| Strategic Investments vs. Ameriprise Financial | Strategic Investments vs. Ares Management Corp | Strategic Investments vs. Superior Plus Corp | Strategic Investments vs. NMI Holdings |
| Volkswagen vs. American Eagle Outfitters | Volkswagen vs. EAT WELL INVESTMENT | Volkswagen vs. Strategic Investments AS | Volkswagen vs. AM EAGLE OUTFITTERS |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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