Correlation Between Volkswagen and Piaggio C
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Piaggio C 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 Piaggio C 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 Piaggio C SpA, you can compare the effects of market volatilities on Volkswagen and Piaggio C 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 Piaggio C. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Piaggio C.
Diversification Opportunities for Volkswagen and Piaggio C
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Volkswagen and Piaggio is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and Piaggio C SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piaggio C SpA 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 Piaggio C. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piaggio C SpA has no effect on the direction of Volkswagen i.e., Volkswagen and Piaggio C go up and down completely randomly.
Pair Corralation between Volkswagen and Piaggio C
Assuming the 90 days horizon Volkswagen AG VZO is expected to generate 0.54 times more return on investment than Piaggio C. However, Volkswagen AG VZO is 1.84 times less risky than Piaggio C. It trades about 0.01 of its potential returns per unit of risk. Piaggio C SpA is currently generating about -0.03 per unit of risk. If you would invest 8,984 in Volkswagen AG VZO on September 13, 2024 and sell it today you would earn a total of 3.00 from holding Volkswagen AG VZO or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG VZO vs. Piaggio C SpA
Performance |
| Timeline |
| Volkswagen AG VZO |
| Piaggio C SpA |
Volkswagen and Piaggio C Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Piaggio C
The main advantage of trading using opposite Volkswagen and Piaggio C positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Piaggio C 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 Piaggio C will offset losses from the drop in Piaggio C's long position.| Volkswagen vs. Volkswagen AG Pref | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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