Correlation Between Volkswagen and Scottish Mortgage

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

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

Diversification Opportunities for Volkswagen and Scottish Mortgage

0.08

Correlation Coefficient

Volkswagen  Scottish Mortgage

Significant diversification

The 3 months correlation between Volkswagen and Scottish is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Scottish Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottish Mortgage 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 Scottish Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottish Mortgage has no effect on the direction of Volkswagen i.e., Volkswagen and Scottish Mortgage go up and down completely randomly.

Pair Corralation between Volkswagen and Scottish Mortgage

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.9 times more return on investment than Scottish Mortgage. However, Volkswagen AG is 1.11 times less risky than Scottish Mortgage. It trades about 0.15 of its potential returns per unit of risk. Scottish Mortgage Investment is currently generating about 0.02 per unit of risk. If you would invest  8,850  in Volkswagen AG on December 25, 2024 and sell it today you would earn a total of  1,320  from holding Volkswagen AG or generate 14.92% return on investment over 90 days.

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

Volkswagen AG  vs.  Scottish Mortgage Investment

Volkswagen AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 11 (%) 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.

Scottish Mortgage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Scottish Mortgage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Volkswagen and Scottish Mortgage

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

The idea behind Volkswagen AG and Scottish Mortgage Investment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.