Correlation Between Volkswagen and Atea ASA

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

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

Diversification Opportunities for Volkswagen and Atea ASA

-0.61

Correlation Coefficient

Volkswagen  Atea ASA

Excellent diversification

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

Pair Corralation between Volkswagen and Atea ASA

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 1.16 times more return on investment than Atea ASA. However, Volkswagen is 1.16 times more volatile than Atea ASA. It trades about 0.22 of its potential returns per unit of risk. Atea ASA is currently generating about -0.02 per unit of risk. If you would invest  8,704  in Volkswagen AG on December 22, 2024 and sell it today you would earn a total of  2,026  from holding Volkswagen AG or generate 23.28% 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.  Atea ASA

Volkswagen AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 17 (%) 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.

Atea ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atea ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Atea ASA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Volkswagen and Atea ASA

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

The idea behind Volkswagen AG and Atea ASA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.