Correlation Between National Retail and Volkswagen

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

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

Diversification Opportunities for National Retail and Volkswagen

0.41

Correlation Coefficient

National Retail  Volkswagen

Very weak diversification

The 3 months correlation between National and Volkswagen is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties 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 National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Volkswagen go up and down completely randomly.

Pair Corralation between National Retail and Volkswagen

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the Volkswagen. But the stock apears to be less risky and, when comparing its historical volatility, National Retail Properties is 1.15 times less risky than Volkswagen. The stock trades about -0.36 of its potential returns per unit of risk. The Volkswagen AG VZO is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,596  in Volkswagen AG VZO on October 11, 2024 and sell it today you would earn a total of  336.00  from holding Volkswagen AG VZO or generate 3.91% return on investment over 90 days.

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

National Retail Properties  vs.  Volkswagen AG VZO

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

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

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Volkswagen is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Retail and Volkswagen

The main advantage of trading using opposite National Retail and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.