Correlation Between Porsche Automobile and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Porsche Automobile 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 Porsche Automobile and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Porsche Automobile Holding and Volkswagen AG, you can compare the effects of market volatilities on Porsche Automobile 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 Porsche Automobile with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porsche Automobile and Volkswagen.
Diversification Opportunities for Porsche Automobile and Volkswagen
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Porsche and Volkswagen is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Porsche Automobile 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 Porsche Automobile Holding 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 Porsche Automobile i.e., Porsche Automobile and Volkswagen go up and down completely randomly.
Pair Corralation between Porsche Automobile and Volkswagen
Assuming the 90 days horizon Porsche Automobile Holding is expected to under-perform the Volkswagen. But the pink sheet apears to be less risky and, when comparing its historical volatility, Porsche Automobile Holding is 1.29 times less risky than Volkswagen. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Volkswagen AG is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 10,564 in Volkswagen AG on August 25, 2024 and sell it today you would lose (1,764) from holding Volkswagen AG or give up 16.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Porsche Automobile Holding vs. Volkswagen AG
Performance |
| Timeline |
| Porsche Automobile |
| Volkswagen AG |
Porsche Automobile and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Porsche Automobile and Volkswagen
The main advantage of trading using opposite Porsche Automobile and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porsche Automobile 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.| Porsche Automobile vs. Volkswagen AG 110 | Porsche Automobile vs. Bayerische Motoren Werke | Porsche Automobile vs. Volkswagen AG | Porsche Automobile vs. Mercedes Benz Group AG |
| Volkswagen vs. Isuzu Motors | Volkswagen vs. Renault SA | Volkswagen vs. Mazda Motor Corp | Volkswagen vs. Bayerische Motoren Werke |
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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