Correlation Between Volkswagen and Ford
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG 110 and Ford Motor, you can compare the effects of market volatilities on Volkswagen and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Ford.
Diversification Opportunities for Volkswagen and Ford
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Volkswagen and Ford is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 110 are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Volkswagen i.e., Volkswagen and Ford go up and down completely randomly.
Pair Corralation between Volkswagen and Ford
Assuming the 90 days horizon Volkswagen AG 110 is expected to generate 0.95 times more return on investment than Ford. However, Volkswagen AG 110 is 1.05 times less risky than Ford. It trades about 0.33 of its potential returns per unit of risk. Ford Motor is currently generating about 0.08 per unit of risk. If you would invest 931.00 in Volkswagen AG 110 on November 1, 2024 and sell it today you would earn a total of 102.00 from holding Volkswagen AG 110 or generate 10.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Volkswagen AG 110 vs. Ford Motor
Performance |
| Timeline |
| Volkswagen AG 110 |
| Ford Motor |
Volkswagen and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Ford
The main advantage of trading using opposite Volkswagen and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Volkswagen AG Pref |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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