Correlation Between Volkswagen and ACHETER-LOUER

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

By analyzing existing cross correlation between Volkswagen AG VZO and ACHETER LOUER EO 145612, you can compare the effects of market volatilities on Volkswagen and ACHETER-LOUER 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 ACHETER-LOUER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and ACHETER-LOUER.

Diversification Opportunities for Volkswagen and ACHETER-LOUER

0.69

Correlation Coefficient

Volkswagen  ACHETER-LOUER

Poor diversification

The 3 months correlation between Volkswagen and ACHETER-LOUER is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and ACHETER LOUER EO 145612 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACHETER LOUER EO 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 VZO are associated (or correlated) with ACHETER-LOUER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACHETER LOUER EO has no effect on the direction of Volkswagen i.e., Volkswagen and ACHETER-LOUER go up and down completely randomly.

Pair Corralation between Volkswagen and ACHETER-LOUER

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to under-perform the ACHETER-LOUER. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG VZO is 63.84 times less risky than ACHETER-LOUER. The stock trades about -0.02 of its potential returns per unit of risk. The ACHETER LOUER EO 145612 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  100,000,000  in ACHETER LOUER EO 145612 on October 13, 2024 and sell it today you would lose (99,999,989) from holding ACHETER LOUER EO 145612 or give up 100.0% of portfolio value over 90 days.

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

Volkswagen AG VZO  vs.  ACHETER LOUER EO 145612

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Volkswagen is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ACHETER LOUER EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACHETER LOUER EO 145612 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Volkswagen and ACHETER-LOUER

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

The idea behind Volkswagen AG VZO and ACHETER LOUER EO 145612 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.