Correlation Between KRISPY KREME and Volkswagen

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

By analyzing existing cross correlation between KRISPY KREME DL 01 and Volkswagen AG VZO, you can compare the effects of market volatilities on KRISPY KREME 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 KRISPY KREME with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and Volkswagen.

Diversification Opportunities for KRISPY KREME and Volkswagen

-0.28

Correlation Coefficient

KRISPY KREME  Volkswagen

Very good diversification

The 3 months correlation between KRISPY and Volkswagen is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 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 KRISPY KREME 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 KRISPY KREME DL 01 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 KRISPY KREME i.e., KRISPY KREME and Volkswagen go up and down completely randomly.

Pair Corralation between KRISPY KREME and Volkswagen

Assuming the 90 days horizon KRISPY KREME DL 01 is expected to under-perform the Volkswagen. In addition to that, KRISPY KREME is 2.13 times more volatile than Volkswagen AG VZO. It trades about -0.01 of its total potential returns per unit of risk. Volkswagen AG VZO is currently generating about -0.02 per unit of volatility. If you would invest  9,996  in Volkswagen AG VZO on October 4, 2024 and sell it today you would lose (1,260) from holding Volkswagen AG VZO or give up 12.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

KRISPY KREME DL 01  vs.  Volkswagen AG VZO

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 rather sound basic indicators, Volkswagen is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KRISPY KREME and Volkswagen

The main advantage of trading using opposite KRISPY KREME and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRISPY KREME 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 KRISPY KREME DL 01 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.