Correlation Between Volkswagen and Pardee Resources

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

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

Diversification Opportunities for Volkswagen and Pardee Resources

-0.63

Correlation Coefficient

Volkswagen  Pardee Resources

Excellent diversification

The 3 months correlation between Volkswagen and Pardee is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Pardee Resources Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pardee Resources 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 Pardee Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pardee Resources has no effect on the direction of Volkswagen i.e., Volkswagen and Pardee Resources go up and down completely randomly.

Pair Corralation between Volkswagen and Pardee Resources

Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Pardee Resources. In addition to that, Volkswagen is 2.27 times more volatile than Pardee Resources Co. It trades about -0.19 of its total potential returns per unit of risk. Pardee Resources Co is currently generating about 0.1 per unit of volatility. If you would invest  29,826  in Pardee Resources Co on September 3, 2024 and sell it today you would earn a total of  1,674  from holding Pardee Resources Co or generate 5.61% 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.  Pardee Resources Co

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 fragile 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.

Pardee Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Pardee Resources is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Volkswagen and Pardee Resources

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

The idea behind Volkswagen AG and Pardee Resources Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.