Correlation Between Volkswagen and Eco Animal

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

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

Diversification Opportunities for Volkswagen and Eco Animal

0.61

Correlation Coefficient

Volkswagen  Eco Animal

Poor diversification

The 3 months correlation between Volkswagen and Eco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Eco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Animal Health 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 Eco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Animal Health has no effect on the direction of Volkswagen i.e., Volkswagen and Eco Animal go up and down completely randomly.

Pair Corralation between Volkswagen and Eco Animal

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.48 times more return on investment than Eco Animal. However, Volkswagen AG is 2.09 times less risky than Eco Animal. It trades about -0.17 of its potential returns per unit of risk. Eco Animal Health is currently generating about -0.16 per unit of risk. If you would invest  10,320  in Volkswagen AG on September 3, 2024 and sell it today you would lose (2,020) from holding Volkswagen AG or give up 19.57% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Eco Animal Health

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Volkswagen and Eco Animal

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

The idea behind Volkswagen AG and Eco Animal Health 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.