Correlation Between Ferrari NV and Porsche Automobil
Can any of the company-specific risk be diversified away by investing in both Ferrari NV and Porsche Automobil 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 Ferrari NV and Porsche Automobil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and Porsche Automobil Holding, you can compare the effects of market volatilities on Ferrari NV and Porsche Automobil 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 Ferrari NV with a short position of Porsche Automobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Porsche Automobil.
Diversification Opportunities for Ferrari NV and Porsche Automobil
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ferrari and Porsche is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil Holding and Ferrari NV 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 Ferrari NV are associated (or correlated) with Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Ferrari NV i.e., Ferrari NV and Porsche Automobil go up and down completely randomly.
Pair Corralation between Ferrari NV and Porsche Automobil
Given the investment horizon of 90 days Ferrari NV is expected to generate 0.78 times more return on investment than Porsche Automobil. However, Ferrari NV is 1.28 times less risky than Porsche Automobil. It trades about -0.28 of its potential returns per unit of risk. Porsche Automobil Holding is currently generating about -0.32 per unit of risk. If you would invest 49,048 in Ferrari NV on August 28, 2024 and sell it today you would lose (5,878) from holding Ferrari NV or give up 11.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. Porsche Automobil Holding
Performance |
| Timeline |
| Ferrari NV |
| Porsche Automobil Holding |
Ferrari NV and Porsche Automobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and Porsche Automobil
The main advantage of trading using opposite Ferrari NV and Porsche Automobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV position performs unexpectedly, Porsche Automobil 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 Porsche Automobil will offset losses from the drop in Porsche Automobil's long position.| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Bayerische Motoren Werke |
| Porsche Automobil vs. Isuzu Motors | Porsche Automobil vs. Renault SA | Porsche Automobil vs. Toyota Motor Corp | Porsche Automobil vs. Porsche Automobile Holding |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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