Correlation Between German American and CBOE Volatility
Can any of the company-specific risk be diversified away by investing in both German American and CBOE Volatility 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 German American and CBOE Volatility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between German American Bancorp and CBOE Volatility Index, you can compare the effects of market volatilities on German American and CBOE Volatility 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 German American with a short position of CBOE Volatility. Check out your portfolio center. Please also check ongoing floating volatility patterns of German American and CBOE Volatility.
Diversification Opportunities for German American and CBOE Volatility
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between German and CBOE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding German American Bancorp and CBOE Volatility Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBOE Volatility Index and German American 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 German American Bancorp are associated (or correlated) with CBOE Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBOE Volatility Index has no effect on the direction of German American i.e., German American and CBOE Volatility go up and down completely randomly.
Pair Corralation between German American and CBOE Volatility
Given the investment horizon of 90 days German American Bancorp is expected to generate 0.49 times more return on investment than CBOE Volatility. However, German American Bancorp is 2.03 times less risky than CBOE Volatility. It trades about 0.18 of its potential returns per unit of risk. CBOE Volatility Index is currently generating about -0.35 per unit of risk. If you would invest 4,025 in German American Bancorp on September 1, 2024 and sell it today you would earn a total of 473.00 from holding German American Bancorp or generate 11.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
German American Bancorp vs. CBOE Volatility Index
Performance |
| Timeline |
German American and CBOE Volatility Volatility Contrast
Predicted Return Density |
| Returns |
German American Bancorp
Pair trading matchups for German American
CBOE Volatility Index
Pair trading matchups for CBOE Volatility
Pair Trading with German American and CBOE Volatility
The main advantage of trading using opposite German American and CBOE Volatility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if German American position performs unexpectedly, CBOE Volatility 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 CBOE Volatility will offset losses from the drop in CBOE Volatility's long position.| German American vs. Lakeland Financial | German American vs. Great Southern Bancorp | German American vs. First Merchants | German American vs. First Financial |
| CBOE Volatility vs. Maiden Holdings | CBOE Volatility vs. MGIC Investment Corp | CBOE Volatility vs. Contagious Gaming | CBOE Volatility vs. Northstar Clean Technologies |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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