Correlation Between China Liberal and Volkswagen

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

By analyzing existing cross correlation between China Liberal Education and Volkswagen AG 110, you can compare the effects of market volatilities on China Liberal 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 China Liberal with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Liberal and Volkswagen.

Diversification Opportunities for China Liberal and Volkswagen

-0.14

Correlation Coefficient

China Liberal  Volkswagen

Good diversification

The 3 months correlation between China and Volkswagen is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 and China Liberal 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 China Liberal Education 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 110 has no effect on the direction of China Liberal i.e., China Liberal and Volkswagen go up and down completely randomly.

Pair Corralation between China Liberal and Volkswagen

Given the investment horizon of 90 days China Liberal Education is expected to generate 26.16 times more return on investment than Volkswagen. However, China Liberal is 26.16 times more volatile than Volkswagen AG 110. It trades about 0.04 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.05 per unit of risk. If you would invest  1,167  in China Liberal Education on October 12, 2024 and sell it today you would lose (778.00) from holding China Liberal Education or give up 66.67% of portfolio value over 90 days.

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

China Liberal Education  vs.  Volkswagen AG 110

China Liberal Education

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Liberal Education are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, China Liberal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China Liberal and Volkswagen

The main advantage of trading using opposite China Liberal and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Liberal 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 China Liberal Education and Volkswagen AG 110 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.