Correlation Between Cenntro Electric and Volkswagen

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

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

Diversification Opportunities for Cenntro Electric and Volkswagen

-0.5

Correlation Coefficient

Cenntro Electric  Volkswagen

Very good diversification

The 3 months correlation between Cenntro and Volkswagen is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cenntro Electric Group and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Cenntro Electric 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 Cenntro Electric Group 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 has no effect on the direction of Cenntro Electric i.e., Cenntro Electric and Volkswagen go up and down completely randomly.

Pair Corralation between Cenntro Electric and Volkswagen

Given the investment horizon of 90 days Cenntro Electric Group is expected to generate 1.34 times more return on investment than Volkswagen. However, Cenntro Electric is 1.34 times more volatile than Volkswagen AG. It trades about 0.05 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.19 per unit of risk. If you would invest  123.00  in Cenntro Electric Group on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Cenntro Electric Group or generate 5.69% return on investment over 90 days.

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

Cenntro Electric Group  vs.  Volkswagen AG

Cenntro Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cenntro Electric Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Cenntro Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cenntro Electric and Volkswagen

The main advantage of trading using opposite Cenntro Electric and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cenntro Electric 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 Cenntro Electric Group and Volkswagen AG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.