Correlation Between Volkswagen and State Bank

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

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

Diversification Opportunities for Volkswagen and State Bank

-0.43

Correlation Coefficient

Volkswagen  State Bank

Very good diversification

The 3 months correlation between Volkswagen and State is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank 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 State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of Volkswagen i.e., Volkswagen and State Bank go up and down completely randomly.

Pair Corralation between Volkswagen and State Bank

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the State Bank. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.06 times less risky than State Bank. The stock trades about -0.05 of its potential returns per unit of risk. The State Bank of is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,979  in State Bank of on October 10, 2024 and sell it today you would earn a total of  2,121  from holding State Bank of or generate 30.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Volkswagen AG  vs.  State Bank of

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 comparatively stable basic indicators, Volkswagen is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

State Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Volkswagen and State Bank

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

The idea behind Volkswagen AG and State Bank of 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..