Correlation Between LION ONE and Volkswagen
Can any of the company-specific risk be diversified away by investing in both LION ONE 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 LION ONE and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LION ONE METALS and Volkswagen AG, you can compare the effects of market volatilities on LION ONE 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 LION ONE with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of LION ONE and Volkswagen.
Diversification Opportunities for LION ONE and Volkswagen
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LION and Volkswagen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and LION ONE 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 LION ONE METALS 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 LION ONE i.e., LION ONE and Volkswagen go up and down completely randomly.
Pair Corralation between LION ONE and Volkswagen
Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the Volkswagen. In addition to that, LION ONE is 2.79 times more volatile than Volkswagen AG. It trades about -0.08 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of volatility. If you would invest 11,490 in Volkswagen AG on September 12, 2024 and sell it today you would lose (2,590) from holding Volkswagen AG or give up 22.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LION ONE METALS vs. Volkswagen AG
Performance |
| Timeline |
| LION ONE METALS |
| Volkswagen AG |
LION ONE and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LION ONE and Volkswagen
The main advantage of trading using opposite LION ONE and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LION ONE 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.The idea behind LION ONE METALS and Volkswagen AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Volkswagen vs. HF FOODS GRP | Volkswagen vs. LION ONE METALS | Volkswagen vs. Associated British Foods | Volkswagen vs. Lifeway Foods |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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