Correlation Between Volkswagen and Isuzu Motors
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors, you can compare the effects of market volatilities on Volkswagen and Isuzu Motors 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 Isuzu Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Isuzu Motors.
Diversification Opportunities for Volkswagen and Isuzu Motors
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Isuzu is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of Volkswagen i.e., Volkswagen and Isuzu Motors go up and down completely randomly.
Pair Corralation between Volkswagen and Isuzu Motors
Assuming the 90 days horizon Volkswagen AG 110 is expected to under-perform the Isuzu Motors. In addition to that, Volkswagen is 1.14 times more volatile than Isuzu Motors. It trades about -0.29 of its total potential returns per unit of risk. Isuzu Motors is currently generating about 0.06 per unit of volatility. If you would invest 1,290 in Isuzu Motors on August 30, 2024 and sell it today you would earn a total of 29.00 from holding Isuzu Motors or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Volkswagen AG 110 vs. Isuzu Motors
Performance |
| Timeline |
| Volkswagen AG 110 |
| Isuzu Motors |
Volkswagen and Isuzu Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Isuzu Motors
The main advantage of trading using opposite Volkswagen and Isuzu Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Isuzu Motors 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 Isuzu Motors will offset losses from the drop in Isuzu Motors' long position.| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG |
| Isuzu Motors vs. Suzuki Motor Corp | Isuzu Motors vs. Mitsubishi Estate Co | Isuzu Motors vs. Daiwa House Industry | Isuzu Motors vs. Mitsubishi Electric Corp |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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