Correlation Between Volkswagen and WPP -

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

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

Diversification Opportunities for Volkswagen and WPP -

-0.61

Correlation Coefficient

Volkswagen  WPP -

Excellent diversification

The 3 months correlation between Volkswagen and WPP is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and WPP Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP Dusseldorf 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 WPP -. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP Dusseldorf has no effect on the direction of Volkswagen i.e., Volkswagen and WPP - go up and down completely randomly.

Pair Corralation between Volkswagen and WPP -

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the WPP -. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.11 times less risky than WPP -. The stock trades about -0.07 of its potential returns per unit of risk. The WPP Dusseldorf is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  895.00  in WPP Dusseldorf on October 8, 2024 and sell it today you would earn a total of  80.00  from holding WPP Dusseldorf or generate 8.94% return on investment over 90 days.

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

Volkswagen AG  vs.  WPP Dusseldorf

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

WPP Dusseldorf

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WPP Dusseldorf are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, WPP - may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Volkswagen and WPP -

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

The idea behind Volkswagen AG and WPP Dusseldorf 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 Transaction History module to view history of all your transactions and understand their impact on performance.