Correlation Between Volkswagen and All American

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

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

Diversification Opportunities for Volkswagen and All American

-0.57

Correlation Coefficient

Volkswagen  All American

Excellent diversification

The 3 months correlation between Volkswagen and All is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and All American Gld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Gld 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 VZO are associated (or correlated) with All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Gld has no effect on the direction of Volkswagen i.e., Volkswagen and All American go up and down completely randomly.

Pair Corralation between Volkswagen and All American

Assuming the 90 days horizon Volkswagen AG VZO is expected to under-perform the All American. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG VZO is 6.23 times less risky than All American. The pink sheet trades about -0.01 of its potential returns per unit of risk. The All American Gld is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.07  in All American Gld on September 3, 2024 and sell it today you would earn a total of  0.03  from holding All American Gld or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Volkswagen AG VZO  vs.  All American Gld

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO 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.

All American Gld

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in All American Gld are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, All American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and All American

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

The idea behind Volkswagen AG VZO and All American Gld 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.