Correlation Between Volkswagen and Automatic Data

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

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

Diversification Opportunities for Volkswagen and Automatic Data

-0.84

Correlation Coefficient

Volkswagen  Automatic Data

Pay attention - limited upside

The 3 months correlation between Volkswagen and Automatic is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Non Vtg and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Non Vtg are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Volkswagen i.e., Volkswagen and Automatic Data go up and down completely randomly.

Pair Corralation between Volkswagen and Automatic Data

Assuming the 90 days trading horizon Volkswagen AG Non Vtg is expected to generate 1.84 times more return on investment than Automatic Data. However, Volkswagen is 1.84 times more volatile than Automatic Data Processing. It trades about 0.2 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.13 per unit of risk. If you would invest  8,460  in Volkswagen AG Non Vtg on October 10, 2024 and sell it today you would earn a total of  512.00  from holding Volkswagen AG Non Vtg or generate 6.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Volkswagen AG Non Vtg  vs.  Automatic Data Processing

Volkswagen AG Non

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG Non Vtg 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Automatic Data Processing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Automatic Data 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 Automatic Data

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

The idea behind Volkswagen AG Non Vtg and Automatic Data Processing 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.