Correlation Between Volkswagen and NIKKON HOLDINGS

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

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

Diversification Opportunities for Volkswagen and NIKKON HOLDINGS

0.9

Correlation Coefficient

Volkswagen  NIKKON HOLDINGS

Almost no diversification

The 3 months correlation between Volkswagen and NIKKON is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and NIKKON HOLDINGS TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKKON HOLDINGS TD 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 NIKKON HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKKON HOLDINGS TD has no effect on the direction of Volkswagen i.e., Volkswagen and NIKKON HOLDINGS go up and down completely randomly.

Pair Corralation between Volkswagen and NIKKON HOLDINGS

Assuming the 90 days horizon Volkswagen is expected to generate 1.38 times less return on investment than NIKKON HOLDINGS. In addition to that, Volkswagen is 1.19 times more volatile than NIKKON HOLDINGS TD. It trades about 0.17 of its total potential returns per unit of risk. NIKKON HOLDINGS TD is currently generating about 0.28 per unit of volatility. If you would invest  1,200  in NIKKON HOLDINGS TD on December 22, 2024 and sell it today you would earn a total of  410.00  from holding NIKKON HOLDINGS TD or generate 34.17% return on investment over 90 days.

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

Volkswagen AG  vs.  NIKKON HOLDINGS TD

Volkswagen AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Volkswagen reported solid returns over the last few months and may actually be approaching a breakup point.

NIKKON HOLDINGS TD

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NIKKON HOLDINGS TD are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NIKKON HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and NIKKON HOLDINGS

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

The idea behind Volkswagen AG and NIKKON HOLDINGS TD 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.