Correlation Between Volkswagen and Technicolor

Can any of the company-specific risk be diversified away by investing in both Volkswagen and Technicolor 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 Technicolor 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 Technicolor, you can compare the effects of market volatilities on Volkswagen and Technicolor 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 Technicolor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Technicolor.

Diversification Opportunities for Volkswagen and Technicolor

0.77

Correlation Coefficient

Volkswagen  Technicolor

Poor diversification

The 3 months correlation between Volkswagen and Technicolor is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Non Vtg and Technicolor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technicolor 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 Technicolor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technicolor has no effect on the direction of Volkswagen i.e., Volkswagen and Technicolor go up and down completely randomly.

Pair Corralation between Volkswagen and Technicolor

Assuming the 90 days trading horizon Volkswagen is expected to generate 3.36 times less return on investment than Technicolor. But when comparing it to its historical volatility, Volkswagen AG Non Vtg is 2.72 times less risky than Technicolor. It trades about 0.11 of its potential returns per unit of risk. Technicolor is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Technicolor on December 27, 2024 and sell it today you would earn a total of  6.00  from holding Technicolor or generate 50.0% return on investment over 90 days.

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

Volkswagen AG Non Vtg  vs.  Technicolor

Volkswagen AG Non

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG Non Vtg are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Volkswagen unveiled solid returns over the last few months and may actually be approaching a breakup point.

Technicolor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technicolor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Technicolor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and Technicolor

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

The idea behind Volkswagen AG Non Vtg and Technicolor 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.