Correlation Between Volkswagen and KAR Auction
Can any of the company-specific risk be diversified away by investing in both Volkswagen and KAR Auction 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 KAR Auction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and KAR Auction Services, you can compare the effects of market volatilities on Volkswagen and KAR Auction 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 KAR Auction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and KAR Auction.
Diversification Opportunities for Volkswagen and KAR Auction
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and KAR is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and KAR Auction Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAR Auction Services 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 KAR Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAR Auction Services has no effect on the direction of Volkswagen i.e., Volkswagen and KAR Auction go up and down completely randomly.
Pair Corralation between Volkswagen and KAR Auction
Assuming the 90 days trading horizon Volkswagen is expected to generate 1.25 times less return on investment than KAR Auction. In addition to that, Volkswagen is 1.04 times more volatile than KAR Auction Services. It trades about 0.13 of its total potential returns per unit of risk. KAR Auction Services is currently generating about 0.17 per unit of volatility. If you would invest 1,870 in KAR Auction Services on September 18, 2024 and sell it today you would earn a total of 70.00 from holding KAR Auction Services or generate 3.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Volkswagen AG vs. KAR Auction Services
Performance |
| Timeline |
| Volkswagen AG |
| KAR Auction Services |
Volkswagen and KAR Auction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and KAR Auction
The main advantage of trading using opposite Volkswagen and KAR Auction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, KAR Auction 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 KAR Auction will offset losses from the drop in KAR Auction's long position.| Volkswagen vs. MERCEDES BENZ GRP ADR14 | Volkswagen vs. Superior Plus Corp | Volkswagen vs. SIVERS SEMICONDUCTORS AB | Volkswagen vs. NorAm Drilling AS |
| KAR Auction vs. United Internet AG | KAR Auction vs. Verizon Communications | KAR Auction vs. ON SEMICONDUCTOR | KAR Auction vs. Spirent Communications plc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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