Correlation Between Golden Metal and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Golden Metal 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 Golden Metal and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Metal Resources and Volkswagen AG, you can compare the effects of market volatilities on Golden Metal 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 Golden Metal with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Metal and Volkswagen.
Diversification Opportunities for Golden Metal and Volkswagen
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Golden and Volkswagen is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Golden Metal 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 Golden Metal Resources 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 Golden Metal i.e., Golden Metal and Volkswagen go up and down completely randomly.
Pair Corralation between Golden Metal and Volkswagen
Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 2.18 times more return on investment than Volkswagen. However, Golden Metal is 2.18 times more volatile than Volkswagen AG. It trades about 0.03 of its potential returns per unit of risk. Volkswagen AG is currently generating about 0.01 per unit of risk. If you would invest 3,150 in Golden Metal Resources on November 4, 2024 and sell it today you would earn a total of 150.00 from holding Golden Metal Resources or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golden Metal Resources vs. Volkswagen AG
Performance |
| Timeline |
| Golden Metal Resources |
| Volkswagen AG |
Golden Metal and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Metal and Volkswagen
The main advantage of trading using opposite Golden Metal and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal 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.| Golden Metal vs. Edinburgh Investment Trust | Golden Metal vs. Molson Coors Beverage | Golden Metal vs. Seraphim Space Investment | Golden Metal vs. Diversified Energy |
| Volkswagen vs. Telecom Italia SpA | Volkswagen vs. Coeur Mining | Volkswagen vs. Batm Advanced Communications | Volkswagen vs. Verizon Communications |
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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