Correlation Between Volkswagen and Photon Energy
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Photon Energy 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 Photon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Photon Energy NV, you can compare the effects of market volatilities on Volkswagen and Photon Energy 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 Photon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Photon Energy.
Diversification Opportunities for Volkswagen and Photon Energy
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Volkswagen and Photon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Photon Energy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photon Energy NV 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 Photon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photon Energy NV has no effect on the direction of Volkswagen i.e., Volkswagen and Photon Energy go up and down completely randomly.
Pair Corralation between Volkswagen and Photon Energy
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.63 times more return on investment than Photon Energy. However, Volkswagen AG is 1.59 times less risky than Photon Energy. It trades about -0.29 of its potential returns per unit of risk. Photon Energy NV is currently generating about -0.22 per unit of risk. If you would invest 231,000 in Volkswagen AG on September 1, 2024 and sell it today you would lose (31,000) from holding Volkswagen AG or give up 13.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG vs. Photon Energy NV
Performance |
| Timeline |
| Volkswagen AG |
| Photon Energy NV |
Volkswagen and Photon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Photon Energy
The main advantage of trading using opposite Volkswagen and Photon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Photon Energy 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 Photon Energy will offset losses from the drop in Photon Energy's long position.| Volkswagen vs. JT ARCH INVESTMENTS | Volkswagen vs. Raiffeisen Bank International | Volkswagen vs. UNIQA Insurance Group | Volkswagen vs. Vienna Insurance Group |
| Photon Energy vs. Vienna Insurance Group | Photon Energy vs. UNIQA Insurance Group | Photon Energy vs. Moneta Money Bank |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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