Correlation Between Volkswagen and Aeon Co
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Aeon Co 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 Aeon Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Aeon Co, you can compare the effects of market volatilities on Volkswagen and Aeon Co 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 Aeon Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Aeon Co.
Diversification Opportunities for Volkswagen and Aeon Co
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Volkswagen and Aeon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Co 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 Aeon Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Co has no effect on the direction of Volkswagen i.e., Volkswagen and Aeon Co go up and down completely randomly.
Pair Corralation between Volkswagen and Aeon Co
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 2.26 times more return on investment than Aeon Co. However, Volkswagen is 2.26 times more volatile than Aeon Co. It trades about 0.18 of its potential returns per unit of risk. Aeon Co is currently generating about 0.31 per unit of risk. If you would invest 10,070 in Volkswagen AG on November 29, 2024 and sell it today you would earn a total of 790.00 from holding Volkswagen AG or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Aeon Co
Performance |
| Timeline |
| Volkswagen AG |
| Aeon Co |
Volkswagen and Aeon Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Aeon Co
The main advantage of trading using opposite Volkswagen and Aeon Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Aeon Co 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 Aeon Co will offset losses from the drop in Aeon Co's long position.| Volkswagen vs. Genertec Universal Medical | Volkswagen vs. UNITED RENTALS | Volkswagen vs. PULSION Medical Systems | Volkswagen vs. China Medical System |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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