Correlation Between VOLKSWAGEN and Novavax
Can any of the company-specific risk be diversified away by investing in both VOLKSWAGEN and Novavax 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 Novavax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VOLKSWAGEN AG VZ and Novavax, you can compare the effects of market volatilities on VOLKSWAGEN and Novavax 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 Novavax. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLKSWAGEN and Novavax.
Diversification Opportunities for VOLKSWAGEN and Novavax
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VOLKSWAGEN and Novavax is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 VZ are associated (or correlated) with Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of VOLKSWAGEN i.e., VOLKSWAGEN and Novavax go up and down completely randomly.
Pair Corralation between VOLKSWAGEN and Novavax
Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to under-perform the Novavax. But the stock apears to be less risky and, when comparing its historical volatility, VOLKSWAGEN AG VZ is 2.66 times less risky than Novavax. The stock trades about -0.34 of its potential returns per unit of risk. The Novavax is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 941.00 in Novavax on August 29, 2024 and sell it today you would lose (103.00) from holding Novavax or give up 10.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VOLKSWAGEN AG VZ vs. Novavax
Performance |
| Timeline |
| VOLKSWAGEN AG VZ |
| Novavax |
VOLKSWAGEN and Novavax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VOLKSWAGEN and Novavax
The main advantage of trading using opposite VOLKSWAGEN and Novavax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VOLKSWAGEN position performs unexpectedly, Novavax 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 Novavax will offset losses from the drop in Novavax's long position.| VOLKSWAGEN vs. Tesla Inc | VOLKSWAGEN vs. Toyota Motor | VOLKSWAGEN vs. Toyota Motor | VOLKSWAGEN vs. BYD Company Limited |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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