Correlation Between Clean Power and Volkswagen

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

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

Diversification Opportunities for Clean Power and Volkswagen

-0.67

Correlation Coefficient

Clean Power  Volkswagen

Excellent diversification

The 3 months correlation between Clean and Volkswagen is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Clean Power Hydrogen and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Clean Power 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 Clean Power Hydrogen 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 Clean Power i.e., Clean Power and Volkswagen go up and down completely randomly.

Pair Corralation between Clean Power and Volkswagen

Assuming the 90 days trading horizon Clean Power Hydrogen is expected to under-perform the Volkswagen. But the stock apears to be less risky and, when comparing its historical volatility, Clean Power Hydrogen is 1.03 times less risky than Volkswagen. The stock trades about -0.12 of its potential returns per unit of risk. The Volkswagen AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,115  in Volkswagen AG on December 25, 2024 and sell it today you would earn a total of  1,298  from holding Volkswagen AG or generate 14.24% return on investment over 90 days.

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

Clean Power Hydrogen  vs.  Volkswagen AG

Clean Power Hydrogen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clean Power Hydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Volkswagen AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Volkswagen unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Power and Volkswagen

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

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..