Correlation Between Volkswagen and GSR II

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

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

Diversification Opportunities for Volkswagen and GSR II

0.0

Correlation Coefficient

Volkswagen  GSR II

Pay attention - limited upside

The 3 months correlation between Volkswagen and GSR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and GSR II Meteora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSR II Meteora 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 GSR II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSR II Meteora has no effect on the direction of Volkswagen i.e., Volkswagen and GSR II go up and down completely randomly.

Pair Corralation between Volkswagen and GSR II

If you would invest  8,692  in Volkswagen AG on December 2, 2024 and sell it today you would earn a total of  2,652  from holding Volkswagen AG or generate 30.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Volkswagen AG  vs.  GSR II Meteora

Volkswagen AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 18 (%) 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.

GSR II Meteora

Risk-Adjusted Performance

Very Weak

Over the last 90 days GSR II Meteora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, GSR II is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Volkswagen and GSR II

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

The idea behind Volkswagen AG and GSR II Meteora 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.