Correlation Between Volkswagen and Allianz SE

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

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

Diversification Opportunities for Volkswagen and Allianz SE

0.33

Correlation Coefficient

Volkswagen  Allianz SE

Weak diversification

The 3 months correlation between Volkswagen and Allianz is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Allianz SE VNA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz SE VNA 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 Allianz SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz SE VNA has no effect on the direction of Volkswagen i.e., Volkswagen and Allianz SE go up and down completely randomly.

Pair Corralation between Volkswagen and Allianz SE

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 2.2 times more return on investment than Allianz SE. However, Volkswagen is 2.2 times more volatile than Allianz SE VNA. It trades about 0.2 of its potential returns per unit of risk. Allianz SE VNA is currently generating about -0.08 per unit of risk. If you would invest  8,515  in Volkswagen AG on October 5, 2024 and sell it today you would earn a total of  460.00  from holding Volkswagen AG or generate 5.4% return on investment over 90 days.

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

Volkswagen AG  vs.  Allianz SE VNA

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.

Allianz SE VNA

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Allianz SE VNA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allianz SE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Volkswagen and Allianz SE

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

The idea behind Volkswagen AG and Allianz SE VNA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.