Correlation Between Volkswagen and China Teletech
Can any of the company-specific risk be diversified away by investing in both Volkswagen and China Teletech 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 China Teletech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG VZO and China Teletech Holding, you can compare the effects of market volatilities on Volkswagen and China Teletech 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 China Teletech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and China Teletech.
Diversification Opportunities for Volkswagen and China Teletech
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and China is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and China Teletech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Teletech Holding 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 VZO are associated (or correlated) with China Teletech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Teletech Holding has no effect on the direction of Volkswagen i.e., Volkswagen and China Teletech go up and down completely randomly.
Pair Corralation between Volkswagen and China Teletech
Assuming the 90 days horizon Volkswagen AG VZO is expected to under-perform the China Teletech. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG VZO is 17.52 times less risky than China Teletech. The pink sheet trades about -0.27 of its potential returns per unit of risk. The China Teletech Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.22 in China Teletech Holding on September 4, 2024 and sell it today you would lose (0.13) from holding China Teletech Holding or give up 59.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Volkswagen AG VZO vs. China Teletech Holding
Performance |
| Timeline |
| Volkswagen AG VZO |
| China Teletech Holding |
Volkswagen and China Teletech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and China Teletech
The main advantage of trading using opposite Volkswagen and China Teletech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, China Teletech 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 China Teletech will offset losses from the drop in China Teletech's long position.| Volkswagen vs. Volkswagen AG Pref | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co |
| China Teletech vs. Manaris Corp | China Teletech vs. Green Planet Bio | China Teletech vs. Continental Beverage Brands | China Teletech vs. Opus Magnum Ameris |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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