Correlation Between Volkswagen and LOANDEPOT INC

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

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

Diversification Opportunities for Volkswagen and LOANDEPOT INC

-0.19

Correlation Coefficient

Volkswagen  LOANDEPOT INC

Good diversification

The 3 months correlation between Volkswagen and LOANDEPOT is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and LOANDEPOT INC A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOANDEPOT INC A 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 LOANDEPOT INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOANDEPOT INC A has no effect on the direction of Volkswagen i.e., Volkswagen and LOANDEPOT INC go up and down completely randomly.

Pair Corralation between Volkswagen and LOANDEPOT INC

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.57 times more return on investment than LOANDEPOT INC. However, Volkswagen AG is 1.74 times less risky than LOANDEPOT INC. It trades about 0.2 of its potential returns per unit of risk. LOANDEPOT INC A is currently generating about -0.45 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Volkswagen AG  vs.  LOANDEPOT INC A

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.

LOANDEPOT INC A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOANDEPOT INC A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LOANDEPOT INC 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 LOANDEPOT INC

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

The idea behind Volkswagen AG and LOANDEPOT INC A 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.