Correlation Between Volkswagen and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Bayerische Motoren 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 Volkswagen and Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Bayerische Motoren Werke, you can compare the effects of market volatilities on Volkswagen and Bayerische Motoren 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 Volkswagen with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Bayerische Motoren.
Diversification Opportunities for Volkswagen and Bayerische Motoren
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Volkswagen and Bayerische is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and Volkswagen 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 Volkswagen AG are associated (or correlated) with Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Volkswagen i.e., Volkswagen and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Volkswagen and Bayerische Motoren
Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Bayerische Motoren. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.07 times less risky than Bayerische Motoren. The pink sheet trades about -0.41 of its potential returns per unit of risk. The Bayerische Motoren Werke is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest 8,340 in Bayerische Motoren Werke on August 29, 2024 and sell it today you would lose (1,056) from holding Bayerische Motoren Werke or give up 12.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Volkswagen AG |
| Bayerische Motoren Werke |
Volkswagen and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Bayerische Motoren
The main advantage of trading using opposite Volkswagen and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Volkswagen vs. Isuzu Motors | Volkswagen vs. Renault SA | Volkswagen vs. Toyota Motor Corp | Volkswagen vs. Porsche Automobile Holding |
| Bayerische Motoren vs. Honda Motor Co | Bayerische Motoren vs. Volkswagen AG VZO | Bayerische Motoren vs. Volkswagen AG | Bayerische Motoren 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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