Correlation Between Volkswagen and BBX Capital

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

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

Diversification Opportunities for Volkswagen and BBX Capital

-0.38

Correlation Coefficient

Volkswagen  BBX Capital

Very good diversification

The 3 months correlation between Volkswagen and BBX is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and BBX Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBX Capital and Volkswagen 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 Volkswagen AG are associated (or correlated) with BBX Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBX Capital has no effect on the direction of Volkswagen i.e., Volkswagen and BBX Capital go up and down completely randomly.

Pair Corralation between Volkswagen and BBX Capital

Assuming the 90 days horizon Volkswagen AG is expected to generate 1.29 times more return on investment than BBX Capital. However, Volkswagen is 1.29 times more volatile than BBX Capital. It trades about 0.12 of its potential returns per unit of risk. BBX Capital is currently generating about -0.11 per unit of risk. If you would invest  9,450  in Volkswagen AG on December 30, 2024 and sell it today you would earn a total of  1,583  from holding Volkswagen AG or generate 16.75% return on investment over 90 days.

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

Volkswagen AG  vs.  BBX Capital

Volkswagen AG

Risk-Adjusted Performance

OK

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

BBX Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBX Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Volkswagen and BBX Capital

The main advantage of trading using opposite Volkswagen and BBX Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, BBX Capital 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 BBX Capital will offset losses from the drop in BBX Capital's long position.

The idea behind Volkswagen AG and BBX Capital 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.