Correlation Between Volkswagen and Porsche Automobil
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Porsche Automobil 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 Porsche Automobil 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 Porsche Automobil Holding, you can compare the effects of market volatilities on Volkswagen and Porsche Automobil 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 Porsche Automobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Porsche Automobil.
Diversification Opportunities for Volkswagen and Porsche Automobil
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Volkswagen and Porsche is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil 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 Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Volkswagen i.e., Volkswagen and Porsche Automobil go up and down completely randomly.
Pair Corralation between Volkswagen and Porsche Automobil
Assuming the 90 days horizon Volkswagen AG VZO is expected to generate 0.82 times more return on investment than Porsche Automobil. However, Volkswagen AG VZO is 1.21 times less risky than Porsche Automobil. It trades about -0.33 of its potential returns per unit of risk. Porsche Automobil Holding is currently generating about -0.32 per unit of risk. If you would invest 9,929 in Volkswagen AG VZO on August 29, 2024 and sell it today you would lose (1,425) from holding Volkswagen AG VZO or give up 14.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG VZO vs. Porsche Automobil Holding
Performance |
| Timeline |
| Volkswagen AG VZO |
| Porsche Automobil Holding |
Volkswagen and Porsche Automobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Porsche Automobil
The main advantage of trading using opposite Volkswagen and Porsche Automobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Porsche Automobil 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 Porsche Automobil will offset losses from the drop in Porsche Automobil's long position.| Volkswagen vs. Volkswagen AG Pref | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co |
| Porsche Automobil vs. Isuzu Motors | Porsche Automobil vs. Renault SA | Porsche Automobil vs. Toyota Motor Corp | Porsche Automobil vs. Porsche Automobile Holding |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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