Correlation Between Bayerische Motoren and Volkswagen

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

Diversification Opportunities for Bayerische Motoren and Volkswagen

0.0

Correlation Coefficient

Bayerische Motoren  Volkswagen

Pay attention - limited upside

The 3 months correlation between Bayerische and Volkswagen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke 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 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 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 Bayerische Motoren i.e., Bayerische Motoren and Volkswagen go up and down completely randomly.

Pair Corralation between Bayerische Motoren and Volkswagen

If you would invest  8,375  in Volkswagen AG VZO on November 28, 2024 and sell it today you would earn a total of  2,664  from holding Volkswagen AG VZO or generate 31.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bayerische Motoren Werke  vs.  Volkswagen AG VZO

Bayerische Motoren Werke

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bayerische Motoren Werke has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bayerische Motoren is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Volkswagen AG VZO

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG VZO are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Volkswagen reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayerische Motoren and Volkswagen

The main advantage of trading using opposite Bayerische Motoren and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren 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 Bayerische Motoren Werke 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.