Correlation Between VIVA WINE and Volkswagen

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

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

Diversification Opportunities for VIVA WINE and Volkswagen

0.75

Correlation Coefficient

VIVA WINE  Volkswagen

Poor diversification

The 3 months correlation between VIVA and Volkswagen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding VIVA WINE GROUP and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and VIVA WINE 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 VIVA WINE GROUP 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 VIVA WINE i.e., VIVA WINE and Volkswagen go up and down completely randomly.

Pair Corralation between VIVA WINE and Volkswagen

Assuming the 90 days horizon VIVA WINE GROUP is expected to under-perform the Volkswagen. In addition to that, VIVA WINE is 1.22 times more volatile than Volkswagen AG. It trades about -0.19 of its total potential returns per unit of risk. Volkswagen AG is currently generating about 0.2 per unit of volatility. If you would invest  8,240  in Volkswagen AG on September 25, 2024 and sell it today you would earn a total of  464.00  from holding Volkswagen AG or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

VIVA WINE GROUP  vs.  Volkswagen AG

VIVA WINE GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with VIVA WINE and Volkswagen

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.