Correlation Between Volkswagen and China Reinsurance
Can any of the company-specific risk be diversified away by investing in both Volkswagen and China Reinsurance 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 Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and China Reinsurance, you can compare the effects of market volatilities on Volkswagen and China Reinsurance 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 Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and China Reinsurance.
Diversification Opportunities for Volkswagen and China Reinsurance
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Volkswagen and China is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and China Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reinsurance 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 China Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reinsurance has no effect on the direction of Volkswagen i.e., Volkswagen and China Reinsurance go up and down completely randomly.
Pair Corralation between Volkswagen and China Reinsurance
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the China Reinsurance. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 8.27 times less risky than China Reinsurance. The stock trades about -0.03 of its potential returns per unit of risk. The China Reinsurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3.88 in China Reinsurance on November 5, 2024 and sell it today you would earn a total of 5.17 from holding China Reinsurance or generate 133.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. China Reinsurance
Performance |
| Timeline |
| Volkswagen AG |
| China Reinsurance |
Volkswagen and China Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and China Reinsurance
The main advantage of trading using opposite Volkswagen and China Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, China Reinsurance 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 Reinsurance will offset losses from the drop in China Reinsurance's long position.| Volkswagen vs. CN MODERN DAIRY | Volkswagen vs. GWILLI FOOD | Volkswagen vs. SENECA FOODS A | Volkswagen vs. Tyson Foods |
| China Reinsurance vs. Gaztransport Technigaz SA | China Reinsurance vs. USWE SPORTS AB | China Reinsurance vs. ANTA SPORTS PRODUCT | China Reinsurance vs. Gold Road Resources |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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