Correlation Between Volkswagen and Halma Plc
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Halma Plc 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 Halma Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Halma plc, you can compare the effects of market volatilities on Volkswagen and Halma Plc 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 Halma Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Halma Plc.
Diversification Opportunities for Volkswagen and Halma Plc
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volkswagen and Halma is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma plc 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 Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Volkswagen i.e., Volkswagen and Halma Plc go up and down completely randomly.
Pair Corralation between Volkswagen and Halma Plc
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Halma Plc. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.15 times less risky than Halma Plc. The stock trades about -0.04 of its potential returns per unit of risk. The Halma plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,627 in Halma plc on October 16, 2024 and sell it today you would earn a total of 581.00 from holding Halma plc or generate 22.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Volkswagen AG vs. Halma plc
Performance |
| Timeline |
| Volkswagen AG |
| Halma plc |
Volkswagen and Halma Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Halma Plc
The main advantage of trading using opposite Volkswagen and Halma Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Halma Plc 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 Halma Plc will offset losses from the drop in Halma Plc's long position.| Volkswagen vs. Transport International Holdings | Volkswagen vs. Gaztransport Technigaz SA | Volkswagen vs. Ryanair Holdings plc | Volkswagen vs. SCIENCE IN SPORT |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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