Correlation Between Volkswagen and Cboe Global

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

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

Diversification Opportunities for Volkswagen and Cboe Global

-0.41

Correlation Coefficient

Volkswagen  Cboe Global

Very good diversification

The 3 months correlation between Volkswagen and Cboe is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Cboe Global Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Global Markets 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 Cboe Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Global Markets has no effect on the direction of Volkswagen i.e., Volkswagen and Cboe Global go up and down completely randomly.

Pair Corralation between Volkswagen and Cboe Global

Assuming the 90 days horizon Volkswagen AG is expected to generate 1.2 times more return on investment than Cboe Global. However, Volkswagen is 1.2 times more volatile than Cboe Global Markets. It trades about 0.22 of its potential returns per unit of risk. Cboe Global Markets is currently generating about -0.07 per unit of risk. If you would invest  8,905  in Volkswagen AG on October 20, 2024 and sell it today you would earn a total of  595.00  from holding Volkswagen AG or generate 6.68% 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.  Cboe Global Markets

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. Despite nearly stable basic indicators, Volkswagen is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cboe Global Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Volkswagen AG and Cboe Global Markets 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.