Correlation Between Golden Metal and Volkswagen

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

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

Diversification Opportunities for Golden Metal and Volkswagen

0.23

Correlation Coefficient

Golden Metal  Volkswagen

Modest diversification

The 3 months correlation between Golden and Volkswagen is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Volkswagen AG Non Vtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Non and Golden Metal 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 Golden Metal Resources 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 Non has no effect on the direction of Golden Metal i.e., Golden Metal and Volkswagen go up and down completely randomly.

Pair Corralation between Golden Metal and Volkswagen

Assuming the 90 days trading horizon Golden Metal Resources is expected to generate 1.64 times more return on investment than Volkswagen. However, Golden Metal is 1.64 times more volatile than Volkswagen AG Non Vtg. It trades about 0.24 of its potential returns per unit of risk. Volkswagen AG Non Vtg is currently generating about 0.12 per unit of risk. If you would invest  2,800  in Golden Metal Resources on December 26, 2024 and sell it today you would earn a total of  1,700  from holding Golden Metal Resources or generate 60.71% return on investment over 90 days.

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

Golden Metal Resources  vs.  Volkswagen AG Non Vtg

Golden Metal Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Metal Resources are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Golden Metal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Volkswagen AG Non

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG Non Vtg are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Volkswagen unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Metal and Volkswagen

The main advantage of trading using opposite Golden Metal and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal 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 Golden Metal Resources and Volkswagen AG Non Vtg 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.