Correlation Between TFS FINANCIAL and Volkswagen

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

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

Diversification Opportunities for TFS FINANCIAL and Volkswagen

-0.24

Correlation Coefficient

TFS FINANCIAL  Volkswagen

Very good diversification

The 3 months correlation between TFS and Volkswagen is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and Volkswagen go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and Volkswagen

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the Volkswagen. But the stock apears to be less risky and, when comparing its historical volatility, TFS FINANCIAL is 1.18 times less risky than Volkswagen. The stock trades about -0.02 of its potential returns per unit of risk. The Volkswagen AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,160  in Volkswagen AG on December 30, 2024 and sell it today you would earn a total of  815.00  from holding Volkswagen AG or generate 8.9% return on investment over 90 days.

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

TFS FINANCIAL  vs.  Volkswagen AG

TFS FINANCIAL

Risk-Adjusted Performance

Very Weak

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

Volkswagen AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Volkswagen may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TFS FINANCIAL and Volkswagen

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

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.