Correlation Between MARKET VECTR and Volkswagen

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

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

Diversification Opportunities for MARKET VECTR and Volkswagen

-0.78

Correlation Coefficient

MARKET VECTR  Volkswagen

Pay attention - limited upside

The 3 months correlation between MARKET and Volkswagen is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and MARKET VECTR 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 MARKET VECTR RETAIL 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 MARKET VECTR i.e., MARKET VECTR and Volkswagen go up and down completely randomly.

Pair Corralation between MARKET VECTR and Volkswagen

Assuming the 90 days trading horizon MARKET VECTR RETAIL is expected to generate 0.49 times more return on investment than Volkswagen. However, MARKET VECTR RETAIL is 2.05 times less risky than Volkswagen. It trades about 0.12 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of risk. If you would invest  17,284  in MARKET VECTR RETAIL on October 9, 2024 and sell it today you would earn a total of  4,561  from holding MARKET VECTR RETAIL or generate 26.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

MARKET VECTR RETAIL  vs.  Volkswagen AG

MARKET VECTR RETAIL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MARKET VECTR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with MARKET VECTR and Volkswagen

The main advantage of trading using opposite MARKET VECTR and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARKET VECTR 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 MARKET VECTR RETAIL 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.