Correlation Between Bayerische Motoren and Controladora Vuela

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

By analyzing existing cross correlation between Bayerische Motoren Werke and Controladora Vuela Compaa, you can compare the effects of market volatilities on Bayerische Motoren and Controladora Vuela 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 Bayerische Motoren with a short position of Controladora Vuela. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Controladora Vuela.

Diversification Opportunities for Bayerische Motoren and Controladora Vuela

0.08

Correlation Coefficient

Bayerische Motoren  Controladora Vuela

Significant diversification

The 3 months correlation between Bayerische and Controladora is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Controladora Vuela Compaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Controladora Vuela Compaa and Bayerische Motoren 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 Bayerische Motoren Werke are associated (or correlated) with Controladora Vuela. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Controladora Vuela Compaa has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Controladora Vuela go up and down completely randomly.

Pair Corralation between Bayerische Motoren and Controladora Vuela

Assuming the 90 days trading horizon Bayerische Motoren is expected to generate 3.29 times less return on investment than Controladora Vuela. But when comparing it to its historical volatility, Bayerische Motoren Werke is 1.24 times less risky than Controladora Vuela. It trades about 0.08 of its potential returns per unit of risk. Controladora Vuela Compaa is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,294  in Controladora Vuela Compaa on September 17, 2024 and sell it today you would earn a total of  395.00  from holding Controladora Vuela Compaa or generate 30.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Bayerische Motoren Werke  vs.  Controladora Vuela Compaa

Bayerische Motoren Werke

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bayerische Motoren Werke are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bayerische Motoren may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Controladora Vuela Compaa

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Controladora Vuela sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayerische Motoren and Controladora Vuela

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

The idea behind Bayerische Motoren Werke and Controladora Vuela Compaa 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.