Correlation Between Volkswagen and China Mobile
Can any of the company-specific risk be diversified away by investing in both Volkswagen and China Mobile 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 Mobile 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 Life Insurance, you can compare the effects of market volatilities on Volkswagen and China Mobile 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 Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and China Mobile.
Diversification Opportunities for Volkswagen and China Mobile
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volkswagen and China is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Volkswagen i.e., Volkswagen and China Mobile go up and down completely randomly.
Pair Corralation between Volkswagen and China Mobile
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the China Mobile. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 2.81 times less risky than China Mobile. The stock trades about -0.08 of its potential returns per unit of risk. The China Life Insurance is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 59.00 in China Life Insurance on September 12, 2024 and sell it today you would earn a total of 135.00 from holding China Life Insurance or generate 228.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. China Life Insurance
Performance |
| Timeline |
| Volkswagen AG |
| China Life Insurance |
Volkswagen and China Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and China Mobile
The main advantage of trading using opposite Volkswagen and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, China Mobile 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 Mobile will offset losses from the drop in China Mobile's long position.| Volkswagen vs. Fukuyama Transporting Co | Volkswagen vs. PT Global Mediacom | Volkswagen vs. PLAYTIKA HOLDING DL 01 | Volkswagen vs. Prosiebensat 1 Media |
| China Mobile vs. Jacquet Metal Service | China Mobile vs. Texas Roadhouse | China Mobile vs. Perseus Mining Limited | China Mobile vs. Evolution Mining Limited |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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