Correlation Between Renault SA and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Renault SA 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 Renault SA and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renault SA and Volkswagen AG 110, you can compare the effects of market volatilities on Renault SA 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 Renault SA with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renault SA and Volkswagen.
Diversification Opportunities for Renault SA and Volkswagen
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Renault and Volkswagen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 and Renault SA 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 Renault SA 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 110 has no effect on the direction of Renault SA i.e., Renault SA and Volkswagen go up and down completely randomly.
Pair Corralation between Renault SA and Volkswagen
Assuming the 90 days horizon Renault SA is expected to generate 1.2 times more return on investment than Volkswagen. However, Renault SA is 1.2 times more volatile than Volkswagen AG 110. It trades about 0.05 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.05 per unit of risk. If you would invest 784.00 in Renault SA on January 17, 2025 and sell it today you would earn a total of 220.00 from holding Renault SA or generate 28.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Renault SA vs. Volkswagen AG 110
Performance |
| Timeline |
| Renault SA |
| Volkswagen AG 110 |
Renault SA and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Renault SA and Volkswagen
The main advantage of trading using opposite Renault SA and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renault SA 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.| Renault SA vs. Mazda Motor | Renault SA vs. Subaru Corp ADR | Renault SA vs. Isuzu Motors | Renault SA vs. Yamaha Motor Co |
| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Volkswagen AG Pref |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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