Correlation Between Volkswagen and Capri Holdings
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Capri Holdings 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 Capri Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Capri Holdings Limited, you can compare the effects of market volatilities on Volkswagen and Capri Holdings 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 Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Capri Holdings.
Diversification Opportunities for Volkswagen and Capri Holdings
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Capri is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Capri Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Volkswagen i.e., Volkswagen and Capri Holdings go up and down completely randomly.
Pair Corralation between Volkswagen and Capri Holdings
Assuming the 90 days horizon Volkswagen AG is expected to generate 0.18 times more return on investment than Capri Holdings. However, Volkswagen AG is 5.55 times less risky than Capri Holdings. It trades about -0.32 of its potential returns per unit of risk. Capri Holdings Limited is currently generating about -0.2 per unit of risk. If you would invest 9,775 in Volkswagen AG on August 25, 2024 and sell it today you would lose (1,325) from holding Volkswagen AG or give up 13.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Capri Holdings Limited
Performance |
| Timeline |
| Volkswagen AG |
| Capri Holdings |
Volkswagen and Capri Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Capri Holdings
The main advantage of trading using opposite Volkswagen and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Capri Holdings 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 Capri Holdings will offset losses from the drop in Capri Holdings' long position.| Volkswagen vs. AUSNUTRIA DAIRY | Volkswagen vs. CITY OFFICE REIT | Volkswagen vs. MAVEN WIRELESS SWEDEN | Volkswagen vs. TreeHouse Foods |
| Capri Holdings vs. OAKTRSPECLENDNEW | Capri Holdings vs. QBE Insurance Group | Capri Holdings vs. Brockhaus Capital Management | Capri Holdings vs. Q2M Managementberatung AG |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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