Correlation Between Dairy Farm and VOLKSWAGEN

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

By analyzing existing cross correlation between Dairy Farm International and VOLKSWAGEN AG VZ, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of VOLKSWAGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and VOLKSWAGEN.

Diversification Opportunities for Dairy Farm and VOLKSWAGEN

-0.67

Correlation Coefficient

Dairy Farm  VOLKSWAGEN

Excellent diversification

The 3 months correlation between Dairy and VOLKSWAGEN is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and VOLKSWAGEN AG VZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLKSWAGEN AG VZ and Dairy Farm 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 Dairy Farm International 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 VZ has no effect on the direction of Dairy Farm i.e., Dairy Farm and VOLKSWAGEN go up and down completely randomly.

Pair Corralation between Dairy Farm and VOLKSWAGEN

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.49 times more return on investment than VOLKSWAGEN. However, Dairy Farm is 1.49 times more volatile than VOLKSWAGEN AG VZ. It trades about 0.0 of its potential returns per unit of risk. VOLKSWAGEN AG VZ is currently generating about -0.01 per unit of risk. If you would invest  267.00  in Dairy Farm International on October 10, 2024 and sell it today you would lose (49.00) from holding Dairy Farm International or give up 18.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Dairy Farm International  vs.  VOLKSWAGEN AG VZ

Dairy Farm International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOLKSWAGEN AG VZ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VOLKSWAGEN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dairy Farm and VOLKSWAGEN

The main advantage of trading using opposite Dairy Farm and VOLKSWAGEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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 Dairy Farm International and VOLKSWAGEN AG VZ 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 Commodity Directory module to find actively traded commodities issued by global exchanges.