Correlation Between Volkswagen and Mazda
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Mazda 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 Mazda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Mazda Motor Corp, you can compare the effects of market volatilities on Volkswagen and Mazda 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 Mazda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Mazda.
Diversification Opportunities for Volkswagen and Mazda
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Volkswagen and Mazda is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Mazda Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor Corp 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 Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor Corp has no effect on the direction of Volkswagen i.e., Volkswagen and Mazda go up and down completely randomly.
Pair Corralation between Volkswagen and Mazda
Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Mazda. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.28 times less risky than Mazda. The pink sheet trades about -0.41 of its potential returns per unit of risk. The Mazda Motor Corp is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 357.00 in Mazda Motor Corp on August 29, 2024 and sell it today you would lose (39.00) from holding Mazda Motor Corp or give up 10.92% 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. Mazda Motor Corp
Performance |
| Timeline |
| Volkswagen AG |
| Mazda Motor Corp |
Volkswagen and Mazda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Mazda
The main advantage of trading using opposite Volkswagen and Mazda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Mazda 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 Mazda will offset losses from the drop in Mazda's long position.| Volkswagen vs. Isuzu Motors | Volkswagen vs. Renault SA | Volkswagen vs. Toyota Motor Corp | Volkswagen vs. Porsche Automobile Holding |
| Mazda vs. Subaru Corp ADR | Mazda vs. Suzuki Motor Corp | Mazda vs. Isuzu Motors | Mazda 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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