Correlation Between Volkswagen and Sinopec Shanghai
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Sinopec Shanghai 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 Sinopec Shanghai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Sinopec Shanghai Petrochemical, you can compare the effects of market volatilities on Volkswagen and Sinopec Shanghai 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 Sinopec Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Sinopec Shanghai.
Diversification Opportunities for Volkswagen and Sinopec Shanghai
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Volkswagen and Sinopec is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Sinopec Shanghai Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Shanghai Pet 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 Sinopec Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Shanghai Pet has no effect on the direction of Volkswagen i.e., Volkswagen and Sinopec Shanghai go up and down completely randomly.
Pair Corralation between Volkswagen and Sinopec Shanghai
Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Sinopec Shanghai. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 4.18 times less risky than Sinopec Shanghai. The stock trades about -0.07 of its potential returns per unit of risk. The Sinopec Shanghai Petrochemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Sinopec Shanghai Petrochemical on August 31, 2024 and sell it today you would earn a total of 1.00 from holding Sinopec Shanghai Petrochemical or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Volkswagen AG vs. Sinopec Shanghai Petrochemical
Performance |
| Timeline |
| Volkswagen AG |
| Sinopec Shanghai Pet |
Volkswagen and Sinopec Shanghai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Sinopec Shanghai
The main advantage of trading using opposite Volkswagen and Sinopec Shanghai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Sinopec Shanghai 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 Sinopec Shanghai will offset losses from the drop in Sinopec Shanghai's long position.| Volkswagen vs. Strategic Investments AS | Volkswagen vs. SIMS METAL MGT | Volkswagen vs. LION ONE METALS | Volkswagen vs. EAT WELL INVESTMENT |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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