Correlation Between Volkswagen and Renault SA
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Renault SA 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 Renault SA 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 Renault SA, you can compare the effects of market volatilities on Volkswagen and Renault SA 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 Renault SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Renault SA.
Diversification Opportunities for Volkswagen and Renault SA
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Volkswagen and Renault is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Volkswagen i.e., Volkswagen and Renault SA go up and down completely randomly.
Pair Corralation between Volkswagen and Renault SA
Assuming the 90 days horizon Volkswagen AG 110 is expected to under-perform the Renault SA. In addition to that, Volkswagen is 1.26 times more volatile than Renault SA. It trades about -0.31 of its total potential returns per unit of risk. Renault SA is currently generating about -0.18 per unit of volatility. If you would invest 908.00 in Renault SA on September 1, 2024 and sell it today you would lose (53.00) from holding Renault SA or give up 5.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG 110 vs. Renault SA
Performance |
| Timeline |
| Volkswagen AG 110 |
| Renault SA |
Volkswagen and Renault SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Renault SA
The main advantage of trading using opposite Volkswagen and Renault SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Renault SA 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 Renault SA will offset losses from the drop in Renault SA's long position.| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Ferrari NV | Volkswagen vs. Toyota Motor | Volkswagen vs. General Motors |
| Renault SA vs. Volkswagen AG 110 | Renault SA vs. Stellantis NV | Renault SA vs. Toyota Motor | Renault SA vs. Honda Motor Co |
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 Directory module to find actively traded commodities issued by global exchanges.
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