Correlation Between Varta AG and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Varta AG 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 Varta AG and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varta AG and Volkswagen AG, you can compare the effects of market volatilities on Varta AG 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 Varta AG with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and Volkswagen.
Diversification Opportunities for Varta AG and Volkswagen
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Varta and Volkswagen is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Varta AG 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 Varta AG 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 Varta AG i.e., Varta AG and Volkswagen go up and down completely randomly.
Pair Corralation between Varta AG and Volkswagen
Assuming the 90 days trading horizon Varta AG is expected to under-perform the Volkswagen. In addition to that, Varta AG is 2.75 times more volatile than Volkswagen AG. It trades about -0.33 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.28 per unit of volatility. If you would invest 9,360 in Volkswagen AG on August 31, 2024 and sell it today you would lose (1,160) from holding Volkswagen AG or give up 12.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Varta AG vs. Volkswagen AG
Performance |
| Timeline |
| Varta AG |
| Volkswagen AG |
Varta AG and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Varta AG and Volkswagen
The main advantage of trading using opposite Varta AG and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG 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.| Varta AG vs. YATRA ONLINE DL 0001 | Varta AG vs. SINGAPORE AIRLINES | Varta AG vs. Aegean Airlines SA | Varta AG vs. BOS BETTER ONLINE |
| Volkswagen vs. Mizuho Financial Group | Volkswagen vs. National Bank Holdings | Volkswagen vs. CHIBA BANK | Volkswagen vs. TFS FINANCIAL |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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