Correlation Between Elmos Semiconductor and Volkswagen

Can any of the company-specific risk be diversified away by investing in both Elmos Semiconductor and Volkswagen 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 Elmos Semiconductor and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elmos Semiconductor SE and Volkswagen AG, you can compare the effects of market volatilities on Elmos Semiconductor and Volkswagen 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 Elmos Semiconductor with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elmos Semiconductor and Volkswagen.

Diversification Opportunities for Elmos Semiconductor and Volkswagen

0.26

Correlation Coefficient

Elmos Semiconductor  Volkswagen

Modest diversification

The 3 months correlation between Elmos and Volkswagen is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Elmos Semiconductor SE and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Elmos Semiconductor 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 Elmos Semiconductor SE are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Elmos Semiconductor i.e., Elmos Semiconductor and Volkswagen go up and down completely randomly.

Pair Corralation between Elmos Semiconductor and Volkswagen

Assuming the 90 days trading horizon Elmos Semiconductor SE is expected to generate 1.75 times more return on investment than Volkswagen. However, Elmos Semiconductor is 1.75 times more volatile than Volkswagen AG. It trades about 0.04 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.04 per unit of risk. If you would invest  6,460  in Elmos Semiconductor SE on September 16, 2024 and sell it today you would earn a total of  340.00  from holding Elmos Semiconductor SE or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Elmos Semiconductor SE  vs.  Volkswagen AG

Elmos Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Elmos Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Volkswagen is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Elmos Semiconductor and Volkswagen

The main advantage of trading using opposite Elmos Semiconductor and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elmos Semiconductor position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.

The idea behind Elmos Semiconductor SE and Volkswagen AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.