Correlation Between Volkswagen and Ferrari NV
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Ferrari NV 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 Ferrari NV 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 Ferrari NV, you can compare the effects of market volatilities on Volkswagen and Ferrari NV 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 Ferrari NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Ferrari NV.
Diversification Opportunities for Volkswagen and Ferrari NV
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Ferrari is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Volkswagen i.e., Volkswagen and Ferrari NV go up and down completely randomly.
Pair Corralation between Volkswagen and Ferrari NV
Assuming the 90 days horizon Volkswagen AG Pref is expected to under-perform the Ferrari NV. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG Pref is 1.0 times less risky than Ferrari NV. The pink sheet trades about -0.35 of its potential returns per unit of risk. The Ferrari NV is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest 49,048 in Ferrari NV on August 28, 2024 and sell it today you would lose (5,524) from holding Ferrari NV or give up 11.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Volkswagen AG Pref vs. Ferrari NV
Performance |
| Timeline |
| Volkswagen AG Pref |
| Ferrari NV |
Volkswagen and Ferrari NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Ferrari NV
The main advantage of trading using opposite Volkswagen and Ferrari NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Ferrari NV 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 Ferrari NV will offset losses from the drop in Ferrari NV's long position.| Volkswagen vs. Volkswagen AG 110 | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Ferrari NV | Volkswagen vs. Bayerische Motoren Werke |
| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Bayerische Motoren Werke |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |