Correlation Between Volkswagen and Absolute Health

Can any of the company-specific risk be diversified away by investing in both Volkswagen and Absolute Health 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 Absolute Health 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 Absolute Health and, you can compare the effects of market volatilities on Volkswagen and Absolute Health 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 Absolute Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Absolute Health.

Diversification Opportunities for Volkswagen and Absolute Health

-0.11

Correlation Coefficient

Volkswagen  Absolute Health

Good diversification

The 3 months correlation between Volkswagen and Absolute is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health 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 Absolute Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Health has no effect on the direction of Volkswagen i.e., Volkswagen and Absolute Health go up and down completely randomly.

Pair Corralation between Volkswagen and Absolute Health

Assuming the 90 days horizon Volkswagen is expected to generate 51.32 times less return on investment than Absolute Health. But when comparing it to its historical volatility, Volkswagen AG VZO is 34.83 times less risky than Absolute Health. It trades about 0.08 of its potential returns per unit of risk. Absolute Health and is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Absolute Health and on December 30, 2024 and sell it today you would earn a total of  0.01  from holding Absolute Health and or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Volkswagen AG VZO  vs.  Absolute Health and

Volkswagen AG VZO

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG VZO are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Volkswagen reported solid returns over the last few months and may actually be approaching a breakup point.

Absolute Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Health and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Absolute Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and Absolute Health

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

The idea behind Volkswagen AG VZO and Absolute Health and 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.