Correlation Between Guangdong Investment and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Volkswagen AG, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Volkswagen.
Diversification Opportunities for Guangdong Investment and Volkswagen
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and Volkswagen is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and Volkswagen go up and down completely randomly.
Pair Corralation between Guangdong Investment and Volkswagen
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the Volkswagen. In addition to that, Guangdong Investment is 3.13 times more volatile than Volkswagen AG. It trades about -0.1 of its total potential returns per unit of risk. Volkswagen AG is currently generating about 0.22 per unit of volatility. If you would invest 9,150 in Volkswagen AG on November 7, 2024 and sell it today you would earn a total of 550.00 from holding Volkswagen AG or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Volkswagen AG
Performance |
| Timeline |
| Guangdong Investment |
| Volkswagen AG |
Guangdong Investment and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Volkswagen
The main advantage of trading using opposite Guangdong Investment and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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.| Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Companhia de Saneamento | Guangdong Investment vs. TTW Public |
| Volkswagen vs. Sanyo Chemical Industries | Volkswagen vs. DATAGROUP SE | Volkswagen vs. TRI CHEMICAL LABORATINC | Volkswagen vs. KINGBOARD CHEMICAL |
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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