Correlation Between Volkswagen and ASSOC BR

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

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

Diversification Opportunities for Volkswagen and ASSOC BR

0.48

Correlation Coefficient

Volkswagen  ASSOC BR

Very weak diversification

The 3 months correlation between Volkswagen and ASSOC is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and ASSOC BR FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASSOC BR FOODS 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 ASSOC BR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASSOC BR FOODS has no effect on the direction of Volkswagen i.e., Volkswagen and ASSOC BR go up and down completely randomly.

Pair Corralation between Volkswagen and ASSOC BR

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the ASSOC BR. In addition to that, Volkswagen is 1.14 times more volatile than ASSOC BR FOODS. It trades about -0.05 of its total potential returns per unit of risk. ASSOC BR FOODS is currently generating about 0.04 per unit of volatility. If you would invest  1,876  in ASSOC BR FOODS on October 5, 2024 and sell it today you would earn a total of  564.00  from holding ASSOC BR FOODS or generate 30.06% return on investment over 90 days.

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

Volkswagen AG  vs.  ASSOC BR FOODS

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. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ASSOC BR FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASSOC BR FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Volkswagen and ASSOC BR

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

The idea behind Volkswagen AG and ASSOC BR FOODS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.