Correlation Between Volkswagen and Federal Home
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Federal Home 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 Federal Home 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 Federal Home Loan, you can compare the effects of market volatilities on Volkswagen and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Federal Home.
Diversification Opportunities for Volkswagen and Federal Home
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and Federal is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Volkswagen i.e., Volkswagen and Federal Home go up and down completely randomly.
Pair Corralation between Volkswagen and Federal Home
Assuming the 90 days horizon Volkswagen AG 110 is expected to under-perform the Federal Home. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG 110 is 7.12 times less risky than Federal Home. The pink sheet trades about -0.31 of its potential returns per unit of risk. The Federal Home Loan is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 725.00 in Federal Home Loan on August 29, 2024 and sell it today you would earn a total of 795.00 from holding Federal Home Loan or generate 109.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG 110 vs. Federal Home Loan
Performance |
| Timeline |
| Volkswagen AG 110 |
| Federal Home Loan |
Volkswagen and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Federal Home
The main advantage of trading using opposite Volkswagen and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG |
| Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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