Correlation Between Volkswagen and Volcon
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Volcon 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 Volcon 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 Volcon Inc, you can compare the effects of market volatilities on Volkswagen and Volcon 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 Volcon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Volcon.
Diversification Opportunities for Volkswagen and Volcon
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Volkswagen and Volcon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Volcon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volcon Inc 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 Volcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volcon Inc has no effect on the direction of Volkswagen i.e., Volkswagen and Volcon go up and down completely randomly.
Pair Corralation between Volkswagen and Volcon
Assuming the 90 days horizon Volkswagen AG Pref is expected to generate 0.15 times more return on investment than Volcon. However, Volkswagen AG Pref is 6.8 times less risky than Volcon. It trades about -0.07 of its potential returns per unit of risk. Volcon Inc is currently generating about -0.21 per unit of risk. If you would invest 1,129 in Volkswagen AG Pref on September 2, 2024 and sell it today you would lose (280.00) from holding Volkswagen AG Pref or give up 24.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG Pref vs. Volcon Inc
Performance |
| Timeline |
| Volkswagen AG Pref |
| Volcon Inc |
Volkswagen and Volcon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Volcon
The main advantage of trading using opposite Volkswagen and Volcon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Volcon 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 Volcon will offset losses from the drop in Volcon's long position.| Volkswagen vs. Volkswagen AG 110 | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Ferrari NV | Volkswagen 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |