Correlation Between Volkswagen and Oxford Technology

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

By analyzing existing cross correlation between Volkswagen AG and Oxford Technology 2, you can compare the effects of market volatilities on Volkswagen and Oxford Technology 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 Oxford Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Oxford Technology.

Diversification Opportunities for Volkswagen and Oxford Technology

-0.76

Correlation Coefficient

Volkswagen  Oxford Technology

Pay attention - limited upside

The 3 months correlation between Volkswagen and Oxford is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Oxford Technology 2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Technology 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 Oxford Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Technology has no effect on the direction of Volkswagen i.e., Volkswagen and Oxford Technology go up and down completely randomly.

Pair Corralation between Volkswagen and Oxford Technology

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 1.64 times more return on investment than Oxford Technology. However, Volkswagen is 1.64 times more volatile than Oxford Technology 2. It trades about 0.11 of its potential returns per unit of risk. Oxford Technology 2 is currently generating about -0.13 per unit of risk. If you would invest  9,115  in Volkswagen AG on December 25, 2024 and sell it today you would earn a total of  1,298  from holding Volkswagen AG or generate 14.24% return on investment over 90 days.

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

Volkswagen AG  vs.  Oxford Technology 2

Volkswagen AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 8 (%) 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.

Oxford Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oxford Technology 2 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Volkswagen and Oxford Technology

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

The idea behind Volkswagen AG and Oxford Technology 2 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.