Correlation Between Volkswagen and Newmont

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

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

Diversification Opportunities for Volkswagen and Newmont

0.72

Correlation Coefficient

Volkswagen  Newmont

Poor diversification

The 3 months correlation between Volkswagen and Newmont is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont 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 Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of Volkswagen i.e., Volkswagen and Newmont go up and down completely randomly.

Pair Corralation between Volkswagen and Newmont

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.77 times more return on investment than Newmont. However, Volkswagen AG is 1.3 times less risky than Newmont. It trades about -0.03 of its potential returns per unit of risk. Newmont is currently generating about -0.16 per unit of risk. If you would invest  9,100  in Volkswagen AG on October 6, 2024 and sell it today you would lose (215.00) from holding Volkswagen AG or give up 2.36% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Newmont

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.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Volkswagen and Newmont

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

The idea behind Volkswagen AG and Newmont 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.