Correlation Between Volkswagen and Ion Beam

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

By analyzing existing cross correlation between Volkswagen AG and Ion Beam Applications, you can compare the effects of market volatilities on Volkswagen and Ion Beam 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 Ion Beam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Ion Beam.

Diversification Opportunities for Volkswagen and Ion Beam

0.39

Correlation Coefficient

Volkswagen  Ion Beam

Weak diversification

The 3 months correlation between Volkswagen and Ion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications 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 are associated (or correlated) with Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of Volkswagen i.e., Volkswagen and Ion Beam go up and down completely randomly.

Pair Corralation between Volkswagen and Ion Beam

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the Ion Beam. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.44 times less risky than Ion Beam. The stock trades about -0.05 of its potential returns per unit of risk. The Ion Beam Applications is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,647  in Ion Beam Applications on October 11, 2024 and sell it today you would lose (312.00) from holding Ion Beam Applications or give up 18.94% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Ion Beam Applications

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ion Beam Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ion Beam Applications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Volkswagen and Ion Beam

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

The idea behind Volkswagen AG and Ion Beam Applications 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.