Correlation Between Volkswagen and Technip Energies

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

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

Diversification Opportunities for Volkswagen and Technip Energies

-0.44

Correlation Coefficient

Volkswagen  Technip Energies

Very good diversification

The 3 months correlation between Volkswagen and Technip is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Technip Energies NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technip Energies 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 Technip Energies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technip Energies has no effect on the direction of Volkswagen i.e., Volkswagen and Technip Energies go up and down completely randomly.

Pair Corralation between Volkswagen and Technip Energies

Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Technip Energies. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.15 times less risky than Technip Energies. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Technip Energies NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,275  in Technip Energies NV on September 5, 2024 and sell it today you would earn a total of  166.00  from holding Technip Energies NV or generate 7.3% return on investment over 90 days.

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

Volkswagen AG  vs.  Technip Energies 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Technip Energies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Technip Energies NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Technip Energies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volkswagen and Technip Energies

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

The idea behind Volkswagen AG and Technip Energies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..