Correlation Between Volkswagen and FD Technologies

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

By analyzing existing cross correlation between Volkswagen AG and FD Technologies Plc, you can compare the effects of market volatilities on Volkswagen and FD Technologies 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 FD Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and FD Technologies.

Diversification Opportunities for Volkswagen and FD Technologies

-0.72

Correlation Coefficient

Volkswagen  FD Technologies

Pay attention - limited upside

The 3 months correlation between Volkswagen and FDRVF is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and FD Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FD Technologies Plc 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 FD Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FD Technologies Plc has no effect on the direction of Volkswagen i.e., Volkswagen and FD Technologies go up and down completely randomly.

Pair Corralation between Volkswagen and FD Technologies

Assuming the 90 days horizon Volkswagen AG is expected to under-perform the FD Technologies. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.24 times less risky than FD Technologies. The pink sheet trades about -0.14 of its potential returns per unit of risk. The FD Technologies Plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,980  in FD Technologies Plc on September 25, 2024 and sell it today you would earn a total of  405.00  from holding FD Technologies Plc or generate 20.45% return on investment over 90 days.

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

Volkswagen AG  vs.  FD Technologies Plc

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 unfluctuating 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.

FD Technologies Plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FD Technologies Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, FD Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and FD Technologies

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

The idea behind Volkswagen AG and FD Technologies Plc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.