Correlation Between Subaru Corp and Porsche Automobil

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

By analyzing existing cross correlation between Subaru Corp ADR and Porsche Automobil Holding, you can compare the effects of market volatilities on Subaru Corp and Porsche Automobil 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 Subaru Corp with a short position of Porsche Automobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subaru Corp and Porsche Automobil.

Diversification Opportunities for Subaru Corp and Porsche Automobil

0.36

Correlation Coefficient

Subaru Corp  Porsche Automobil

Weak diversification

The 3 months correlation between Subaru and Porsche is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp ADR and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil Holding and Subaru Corp 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 Subaru Corp ADR are associated (or correlated) with Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Subaru Corp i.e., Subaru Corp and Porsche Automobil go up and down completely randomly.

Pair Corralation between Subaru Corp and Porsche Automobil

Assuming the 90 days horizon Subaru Corp is expected to generate 7.31 times less return on investment than Porsche Automobil. In addition to that, Subaru Corp is 1.1 times more volatile than Porsche Automobil Holding. It trades about 0.03 of its total potential returns per unit of risk. Porsche Automobil Holding is currently generating about 0.22 per unit of volatility. If you would invest  3,584  in Porsche Automobil Holding on October 25, 2024 and sell it today you would earn a total of  216.00  from holding Porsche Automobil Holding or generate 6.03% return on investment over 90 days.

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

Subaru Corp ADR  vs.  Porsche Automobil Holding

Subaru Corp ADR

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Subaru Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Subaru Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Porsche Automobil Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Subaru Corp and Porsche Automobil

The main advantage of trading using opposite Subaru Corp and Porsche Automobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subaru Corp position performs unexpectedly, Porsche Automobil 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 Porsche Automobil will offset losses from the drop in Porsche Automobil's long position.

The idea behind Subaru Corp ADR and Porsche Automobil Holding 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.