Correlation Between Volkswagen and Community Financial

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

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

Diversification Opportunities for Volkswagen and Community Financial

0.83

Correlation Coefficient

Volkswagen  Community Financial

Very poor diversification

The 3 months correlation between Volkswagen and Community is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Community Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Financial Corp 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 Community Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Financial Corp has no effect on the direction of Volkswagen i.e., Volkswagen and Community Financial go up and down completely randomly.

Pair Corralation between Volkswagen and Community Financial

If you would invest  2,709  in Community Financial Corp on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Community Financial Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.27%
Values	Daily Returns

Volkswagen AG  vs.  Community Financial Corp

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.

Community Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Community Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Community Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Volkswagen and Community Financial

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

The idea behind Volkswagen AG and Community Financial Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.