Correlation Between GreenPower and Volkswagen
Can any of the company-specific risk be diversified away by investing in both GreenPower 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 GreenPower and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GreenPower Motor and Volkswagen AG, you can compare the effects of market volatilities on GreenPower 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 GreenPower with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of GreenPower and Volkswagen.
Diversification Opportunities for GreenPower and Volkswagen
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GreenPower and Volkswagen is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GreenPower Motor and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and GreenPower 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 GreenPower Motor 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 GreenPower i.e., GreenPower and Volkswagen go up and down completely randomly.
Pair Corralation between GreenPower and Volkswagen
Allowing for the 90-day total investment horizon GreenPower Motor is expected to under-perform the Volkswagen. In addition to that, GreenPower is 2.76 times more volatile than Volkswagen AG. It trades about -0.05 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.06 per unit of volatility. If you would invest 12,542 in Volkswagen AG on September 2, 2024 and sell it today you would lose (3,842) from holding Volkswagen AG or give up 30.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GreenPower Motor vs. Volkswagen AG
Performance |
| Timeline |
| GreenPower Motor |
| Volkswagen AG |
GreenPower and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GreenPower and Volkswagen
The main advantage of trading using opposite GreenPower and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenPower 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.| GreenPower vs. Phoenix Motor Common | GreenPower vs. Envirotech Vehicles | GreenPower vs. Volcon Inc | GreenPower vs. Zapp Electric Vehicles |
| Volkswagen vs. Volkswagen AG 110 | Volkswagen vs. Stellantis NV | Volkswagen vs. Toyota Motor | 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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