Correlation Between Volkswagen and F5 Networks

Can any of the company-specific risk be diversified away by investing in both Volkswagen and F5 Networks 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 F5 Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Volkswagen AG and F5 Networks, you can compare the effects of market volatilities on Volkswagen and F5 Networks 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 F5 Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and F5 Networks.

Diversification Opportunities for Volkswagen and F5 Networks

-0.77

Correlation Coefficient

Volkswagen  F5 Networks

Pay attention - limited upside

The 3 months correlation between Volkswagen and FFV is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and F5 Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F5 Networks 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 F5 Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F5 Networks has no effect on the direction of Volkswagen i.e., Volkswagen and F5 Networks go up and down completely randomly.

Pair Corralation between Volkswagen and F5 Networks

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the F5 Networks. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.16 times less risky than F5 Networks. The stock trades about -0.05 of its potential returns per unit of risk. The F5 Networks is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  15,975  in F5 Networks on October 7, 2024 and sell it today you would earn a total of  8,695  from holding F5 Networks or generate 54.43% return on investment over 90 days.

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

Volkswagen AG  vs.  F5 Networks

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.

F5 Networks

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in F5 Networks are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, F5 Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and F5 Networks

The main advantage of trading using opposite Volkswagen and F5 Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, F5 Networks 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 F5 Networks will offset losses from the drop in F5 Networks' long position.

The idea behind Volkswagen AG and F5 Networks 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 Stocks Directory module to find actively traded stocks across global markets.