Correlation Between Volkswagen and Commerzbank
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Commerzbank 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 Commerzbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Commerzbank AG, you can compare the effects of market volatilities on Volkswagen and Commerzbank 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 Commerzbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Commerzbank.
Diversification Opportunities for Volkswagen and Commerzbank
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Volkswagen and Commerzbank is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG 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 Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of Volkswagen i.e., Volkswagen and Commerzbank go up and down completely randomly.
Pair Corralation between Volkswagen and Commerzbank
Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Commerzbank. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.6 times less risky than Commerzbank. The stock trades about -0.06 of its potential returns per unit of risk. The Commerzbank AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 736.00 in Commerzbank AG on August 26, 2024 and sell it today you would earn a total of 774.00 from holding Commerzbank AG or generate 105.16% 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. Commerzbank AG
Performance |
| Timeline |
| Volkswagen AG |
| Commerzbank AG |
Volkswagen and Commerzbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Commerzbank
The main advantage of trading using opposite Volkswagen and Commerzbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Commerzbank 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 Commerzbank will offset losses from the drop in Commerzbank's long position.| Volkswagen vs. ELECTRONIC ARTS | Volkswagen vs. CVS Health | Volkswagen vs. KIMBALL ELECTRONICS | Volkswagen vs. YOOMA WELLNESS INC |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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