Correlation Between Volkswagen and China Mobile

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

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

Diversification Opportunities for Volkswagen and China Mobile

0.06

Correlation Coefficient

Volkswagen  China Mobile

Significant diversification

The 3 months correlation between Volkswagen and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and China Mobile Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile Limited 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 China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile Limited has no effect on the direction of Volkswagen i.e., Volkswagen and China Mobile go up and down completely randomly.

Pair Corralation between Volkswagen and China Mobile

If you would invest  856.00  in China Mobile Limited on October 6, 2024 and sell it today you would earn a total of  0.00  from holding China Mobile Limited or generate 0.0% return on investment over 90 days.

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

Volkswagen AG  vs.  China Mobile Limited

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.

China Mobile Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Mobile Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Volkswagen and China Mobile

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

The idea behind Volkswagen AG and China Mobile Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.