Correlation Between Volkswagen and Ferrari NV

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

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

Diversification Opportunities for Volkswagen and Ferrari NV

0.72

Correlation Coefficient

Volkswagen  Ferrari NV

Poor diversification

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

Pair Corralation between Volkswagen and Ferrari NV

Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Ferrari NV. In addition to that, Volkswagen is 1.24 times more volatile than Ferrari NV. It trades about -0.19 of its total potential returns per unit of risk. Ferrari NV is currently generating about -0.13 per unit of volatility. If you would invest  49,679  in Ferrari NV on August 30, 2024 and sell it today you would lose (6,522) from holding Ferrari NV or give up 13.13% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Ferrari NV

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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Volkswagen and Ferrari NV

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

The idea behind Volkswagen AG and Ferrari NV 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.