Correlation Between Volkswagen and Kinnevik Investment

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

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

Diversification Opportunities for Volkswagen and Kinnevik Investment

0.15

Correlation Coefficient

Volkswagen  Kinnevik Investment

Average diversification

The 3 months correlation between Volkswagen and Kinnevik is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Volkswagen i.e., Volkswagen and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Volkswagen and Kinnevik Investment

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 1.08 times more return on investment than Kinnevik Investment. However, Volkswagen is 1.08 times more volatile than Kinnevik Investment AB. It trades about 0.12 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.01 per unit of risk. If you would invest  9,115  in Volkswagen AG on December 26, 2024 and sell it today you would earn a total of  1,450  from holding Volkswagen AG or generate 15.91% return on investment over 90 days.

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

Volkswagen AG  vs.  Kinnevik Investment AB

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.

Kinnevik Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinnevik Investment AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kinnevik Investment 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 Volkswagen and Kinnevik Investment

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

The idea behind Volkswagen AG and Kinnevik Investment AB 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.