Correlation Between Volkswagen and Commencement Bancorp
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Commencement Bancorp 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 Commencement Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Commencement Bancorp, you can compare the effects of market volatilities on Volkswagen and Commencement Bancorp 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 Commencement Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Commencement Bancorp.
Diversification Opportunities for Volkswagen and Commencement Bancorp
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volkswagen and Commencement is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Commencement Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commencement Bancorp 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 Commencement Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commencement Bancorp has no effect on the direction of Volkswagen i.e., Volkswagen and Commencement Bancorp go up and down completely randomly.
Pair Corralation between Volkswagen and Commencement Bancorp
Assuming the 90 days horizon Volkswagen AG is expected to generate 8.43 times more return on investment than Commencement Bancorp. However, Volkswagen is 8.43 times more volatile than Commencement Bancorp. It trades about 0.39 of its potential returns per unit of risk. Commencement Bancorp is currently generating about -0.46 per unit of risk. If you would invest 9,346 in Volkswagen AG on October 26, 2024 and sell it today you would earn a total of 906.00 from holding Volkswagen AG or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Commencement Bancorp
Performance |
| Timeline |
| Volkswagen AG |
| Commencement Bancorp |
Volkswagen and Commencement Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Commencement Bancorp
The main advantage of trading using opposite Volkswagen and Commencement Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Commencement Bancorp 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 Commencement Bancorp will offset losses from the drop in Commencement Bancorp's long position.| Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Bayerische Motoren Werke |
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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.
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