Correlation Between Volkswagen and Pharos Energy
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Pharos Energy 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 Pharos Energy 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 Pharos Energy plc, you can compare the effects of market volatilities on Volkswagen and Pharos Energy 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 Pharos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Pharos Energy.
Diversification Opportunities for Volkswagen and Pharos Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Pharos is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Pharos Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharos Energy plc 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 Pharos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharos Energy plc has no effect on the direction of Volkswagen i.e., Volkswagen and Pharos Energy go up and down completely randomly.
Pair Corralation between Volkswagen and Pharos Energy
Assuming the 90 days horizon Volkswagen AG Pref is expected to generate 0.51 times more return on investment than Pharos Energy. However, Volkswagen AG Pref is 1.97 times less risky than Pharos Energy. It trades about -0.28 of its potential returns per unit of risk. Pharos Energy plc is currently generating about -0.21 per unit of risk. If you would invest 989.00 in Volkswagen AG Pref on August 29, 2024 and sell it today you would lose (127.00) from holding Volkswagen AG Pref or give up 12.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG Pref vs. Pharos Energy plc
Performance |
| Timeline |
| Volkswagen AG Pref |
| Pharos Energy plc |
Volkswagen and Pharos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Pharos Energy
The main advantage of trading using opposite Volkswagen and Pharos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Pharos Energy 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 Pharos Energy will offset losses from the drop in Pharos Energy's long position.| Volkswagen vs. Volkswagen AG 110 | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Ferrari NV | Volkswagen vs. Bayerische Motoren Werke |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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