Correlation Between Volkswagen and Moodys
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Moodys 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 Moodys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Moodys, you can compare the effects of market volatilities on Volkswagen and Moodys 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 Moodys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Moodys.
Diversification Opportunities for Volkswagen and Moodys
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volkswagen and Moodys is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Volkswagen i.e., Volkswagen and Moodys go up and down completely randomly.
Pair Corralation between Volkswagen and Moodys
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Moodys. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.09 times less risky than Moodys. The stock trades about -0.08 of its potential returns per unit of risk. The Moodys is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 34,700 in Moodys on September 4, 2024 and sell it today you would earn a total of 13,030 from holding Moodys or generate 37.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Volkswagen AG vs. Moodys
Performance |
| Timeline |
| Volkswagen AG |
| Moodys |
Volkswagen and Moodys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Moodys
The main advantage of trading using opposite Volkswagen and Moodys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Moodys 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 Moodys will offset losses from the drop in Moodys' long position.| Volkswagen vs. Tesla Inc | Volkswagen vs. Toyota Motor | Volkswagen vs. BYD Company Limited | Volkswagen vs. Superior Plus Corp |
| Moodys vs. Sumitomo Rubber Industries | Moodys vs. Compagnie Plastic Omnium | Moodys vs. KINGBOARD CHEMICAL | Moodys vs. NISSAN CHEMICAL IND |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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