Correlation Between Volkswagen and ATT

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

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

Diversification Opportunities for Volkswagen and ATT

-0.57

Correlation Coefficient

Volkswagen  ATT

Excellent diversification

The 3 months correlation between Volkswagen and ATT is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Volkswagen i.e., Volkswagen and ATT go up and down completely randomly.

Pair Corralation between Volkswagen and ATT

Assuming the 90 days trading horizon Volkswagen is expected to generate 13.73 times less return on investment than ATT. In addition to that, Volkswagen is 1.02 times more volatile than ATT Inc. It trades about 0.01 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.12 per unit of volatility. If you would invest  1,960  in ATT Inc on October 22, 2024 and sell it today you would earn a total of  199.00  from holding ATT Inc or generate 10.15% return on investment over 90 days.

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

Volkswagen AG  vs.  ATT Inc

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 rather sound basic indicators, Volkswagen is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ATT Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, ATT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Volkswagen and ATT

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

The idea behind Volkswagen AG and ATT Inc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.