Correlation Between CVW CLEANTECH and Volkswagen

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

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

Diversification Opportunities for CVW CLEANTECH and Volkswagen

-0.68

Correlation Coefficient

CVW CLEANTECH  Volkswagen

Excellent diversification

The 3 months correlation between CVW and Volkswagen is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and CVW CLEANTECH 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 CVW CLEANTECH INC 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 CVW CLEANTECH i.e., CVW CLEANTECH and Volkswagen go up and down completely randomly.

Pair Corralation between CVW CLEANTECH and Volkswagen

Assuming the 90 days trading horizon CVW CLEANTECH INC is expected to under-perform the Volkswagen. In addition to that, CVW CLEANTECH is 1.9 times more volatile than Volkswagen AG. It trades about -0.02 of its total potential returns per unit of risk. Volkswagen AG is currently generating about 0.13 per unit of volatility. If you would invest  9,150  in Volkswagen AG on December 22, 2024 and sell it today you would earn a total of  1,320  from holding Volkswagen AG or generate 14.43% return on investment over 90 days.

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

CVW CLEANTECH INC  vs.  Volkswagen AG

CVW CLEANTECH INC

Risk-Adjusted Performance

Very Weak

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

Volkswagen AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Volkswagen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVW CLEANTECH and Volkswagen

The main advantage of trading using opposite CVW CLEANTECH and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CLEANTECH 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 CVW CLEANTECH INC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.