Correlation Between NetApp and Volkswagen

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Can any of the company-specific risk be diversified away by investing in both NetApp 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 NetApp and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetApp Inc and Volkswagen AG, you can compare the effects of market volatilities on NetApp 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 NetApp with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetApp and Volkswagen.

Diversification Opportunities for NetApp and Volkswagen

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NetApp and Volkswagen is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and NetApp 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 NetApp Inc 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 NetApp i.e., NetApp and Volkswagen go up and down completely randomly.

Pair Corralation between NetApp and Volkswagen

Assuming the 90 days horizon NetApp Inc is expected to generate 2.04 times more return on investment than Volkswagen. However, NetApp is 2.04 times more volatile than Volkswagen AG. It trades about 0.1 of its potential returns per unit of risk. Volkswagen AG is currently generating about 0.09 per unit of risk. If you would invest  11,286  in NetApp Inc on September 13, 2024 and sell it today you would earn a total of  604.00  from holding NetApp Inc or generate 5.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

NetApp Inc  vs.  Volkswagen AG

 Performance 
       Timeline  
NetApp Inc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.
Volkswagen AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NetApp and Volkswagen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NetApp and Volkswagen

The main advantage of trading using opposite NetApp and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp 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 NetApp Inc 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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