Correlation Between Suntory Beverage and Volkswagen

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

By analyzing existing cross correlation between Suntory Beverage Food and Volkswagen AG VZO, you can compare the effects of market volatilities on Suntory Beverage and Volkswagen 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 Suntory Beverage with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suntory Beverage and Volkswagen.

Diversification Opportunities for Suntory Beverage and Volkswagen

0.51

Correlation Coefficient

Suntory Beverage  Volkswagen

Very weak diversification

The 3 months correlation between Suntory and Volkswagen is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Suntory Beverage Food and Volkswagen AG VZO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG VZO and Suntory Beverage 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 Suntory Beverage Food are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG VZO has no effect on the direction of Suntory Beverage i.e., Suntory Beverage and Volkswagen go up and down completely randomly.

Pair Corralation between Suntory Beverage and Volkswagen

Assuming the 90 days horizon Suntory Beverage Food is expected to under-perform the Volkswagen. In addition to that, Suntory Beverage is 1.25 times more volatile than Volkswagen AG VZO. It trades about -0.09 of its total potential returns per unit of risk. Volkswagen AG VZO is currently generating about -0.09 per unit of volatility. If you would invest  9,382  in Volkswagen AG VZO on October 6, 2024 and sell it today you would lose (700.00) from holding Volkswagen AG VZO or give up 7.46% of portfolio value over 90 days.

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

Suntory Beverage Food  vs.  Volkswagen AG VZO

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic 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 Suntory Beverage and Volkswagen

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

The idea behind Suntory Beverage Food and Volkswagen AG VZO 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 Transaction History module to view history of all your transactions and understand their impact on performance.