Correlation Between Volkswagen and Bertrandt

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

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

Diversification Opportunities for Volkswagen and Bertrandt

0.85

Correlation Coefficient

Volkswagen  Bertrandt

Very poor diversification

The 3 months correlation between Volkswagen and Bertrandt is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Bertrandt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bertrandt AG 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 Bertrandt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bertrandt AG has no effect on the direction of Volkswagen i.e., Volkswagen and Bertrandt go up and down completely randomly.

Pair Corralation between Volkswagen and Bertrandt

Assuming the 90 days trading horizon Volkswagen is expected to generate 2.07 times less return on investment than Bertrandt. But when comparing it to its historical volatility, Volkswagen AG is 1.58 times less risky than Bertrandt. It trades about 0.12 of its potential returns per unit of risk. Bertrandt AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,793  in Bertrandt AG on December 26, 2024 and sell it today you would earn a total of  627.00  from holding Bertrandt AG or generate 34.97% return on investment over 90 days.

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

Volkswagen AG  vs.  Bertrandt AG

Volkswagen AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Volkswagen unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bertrandt AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bertrandt AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bertrandt unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and Bertrandt

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

The idea behind Volkswagen AG and Bertrandt 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.