Correlation Between Volkswagen and VOLKSWAGEN ADR
Can any of the company-specific risk be diversified away by investing in both Volkswagen and VOLKSWAGEN ADR 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 VOLKSWAGEN ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and VOLKSWAGEN ADR 110ON, you can compare the effects of market volatilities on Volkswagen and VOLKSWAGEN ADR 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 VOLKSWAGEN ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and VOLKSWAGEN ADR.
Diversification Opportunities for Volkswagen and VOLKSWAGEN ADR
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Volkswagen and VOLKSWAGEN is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and VOLKSWAGEN ADR 110ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLKSWAGEN ADR 110ON 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 VOLKSWAGEN ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLKSWAGEN ADR 110ON has no effect on the direction of Volkswagen i.e., Volkswagen and VOLKSWAGEN ADR go up and down completely randomly.
Pair Corralation between Volkswagen and VOLKSWAGEN ADR
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.78 times more return on investment than VOLKSWAGEN ADR. However, Volkswagen AG is 1.28 times less risky than VOLKSWAGEN ADR. It trades about -0.05 of its potential returns per unit of risk. VOLKSWAGEN ADR 110ON is currently generating about -0.05 per unit of risk. If you would invest 13,080 in Volkswagen AG on November 28, 2024 and sell it today you would lose (2,340) from holding Volkswagen AG or give up 17.89% 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. VOLKSWAGEN ADR 110ON
Performance |
| Timeline |
| Volkswagen AG |
| VOLKSWAGEN ADR 110ON |
Volkswagen and VOLKSWAGEN ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and VOLKSWAGEN ADR
The main advantage of trading using opposite Volkswagen and VOLKSWAGEN ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, VOLKSWAGEN ADR 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 VOLKSWAGEN ADR will offset losses from the drop in VOLKSWAGEN ADR's long position.| Volkswagen vs. Perdoceo Education | Volkswagen vs. G8 EDUCATION | Volkswagen vs. BOS BETTER ONLINE | Volkswagen vs. PACIFIC ONLINE |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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