Correlation Between Rolls Royce and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Rolls Royce 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 Rolls Royce and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings PLC and Volkswagen AG, you can compare the effects of market volatilities on Rolls Royce 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 Rolls Royce with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Volkswagen.
Diversification Opportunities for Rolls Royce and Volkswagen
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rolls and Volkswagen is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Rolls Royce 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 Rolls Royce Holdings PLC 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 Rolls Royce i.e., Rolls Royce and Volkswagen go up and down completely randomly.
Pair Corralation between Rolls Royce and Volkswagen
Assuming the 90 days trading horizon Rolls Royce is expected to generate 4.86 times less return on investment than Volkswagen. But when comparing it to its historical volatility, Rolls Royce Holdings PLC is 1.21 times less risky than Volkswagen. It trades about 0.04 of its potential returns per unit of risk. Volkswagen AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 8,940 in Volkswagen AG on October 13, 2024 and sell it today you would earn a total of 400.00 from holding Volkswagen AG or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Volkswagen AG
Performance |
| Timeline |
| Rolls Royce Holdings |
| Volkswagen AG |
Rolls Royce and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Volkswagen
The main advantage of trading using opposite Rolls Royce and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce 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.| Rolls Royce vs. Leroy Seafood Group | Rolls Royce vs. Air Products Chemicals | Rolls Royce vs. Finnair Oyj | Rolls Royce vs. Delta Air Lines |
| Volkswagen vs. Atalaya Mining | Volkswagen vs. Seraphim Space Investment | Volkswagen vs. Thor Mining PLC | Volkswagen vs. Nordic Semiconductor ASA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |