Correlation Between Volkswagen and GM
Can any of the company-specific risk be diversified away by investing in both Volkswagen and GM 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 GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG Pref and General Motors, you can compare the effects of market volatilities on Volkswagen and GM 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 GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and GM.
Diversification Opportunities for Volkswagen and GM
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Volkswagen and GM is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General 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 Pref are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Volkswagen i.e., Volkswagen and GM go up and down completely randomly.
Pair Corralation between Volkswagen and GM
Assuming the 90 days horizon Volkswagen AG Pref is expected to generate 0.47 times more return on investment than GM. However, Volkswagen AG Pref is 2.13 times less risky than GM. It trades about 0.39 of its potential returns per unit of risk. General Motors is currently generating about -0.11 per unit of risk. If you would invest 912.00 in Volkswagen AG Pref on November 1, 2024 and sell it today you would earn a total of 101.00 from holding Volkswagen AG Pref or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Volkswagen AG Pref vs. General Motors
Performance |
| Timeline |
| Volkswagen AG Pref |
| General Motors |
Volkswagen and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and GM
The main advantage of trading using opposite Volkswagen and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| Volkswagen vs. Volkswagen AG 110 | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Ferrari NV | Volkswagen vs. Porsche Automobile Holding |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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