Correlation Between Volkswagen and KASPIKZ 1

Can any of the company-specific risk be diversified away by investing in both Volkswagen and KASPIKZ 1 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 KASPIKZ 1 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 KASPIKZ 1, you can compare the effects of market volatilities on Volkswagen and KASPIKZ 1 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 KASPIKZ 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and KASPIKZ 1.

Diversification Opportunities for Volkswagen and KASPIKZ 1

-0.72

Correlation Coefficient

Volkswagen  KASPIKZ 1

Pay attention - limited upside

The 3 months correlation between Volkswagen and KASPIKZ is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and KASPIKZ 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KASPIKZ 1 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 KASPIKZ 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KASPIKZ 1 has no effect on the direction of Volkswagen i.e., Volkswagen and KASPIKZ 1 go up and down completely randomly.

Pair Corralation between Volkswagen and KASPIKZ 1

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to generate 0.4 times more return on investment than KASPIKZ 1. However, Volkswagen AG VZO is 2.47 times less risky than KASPIKZ 1. It trades about 0.37 of its potential returns per unit of risk. KASPIKZ 1 is currently generating about -0.07 per unit of risk. If you would invest  8,124  in Volkswagen AG VZO on September 22, 2024 and sell it today you would earn a total of  756.00  from holding Volkswagen AG VZO or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Volkswagen AG VZO  vs.  KASPIKZ 1

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

KASPIKZ 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KASPIKZ 1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KASPIKZ 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volkswagen and KASPIKZ 1

The main advantage of trading using opposite Volkswagen and KASPIKZ 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, KASPIKZ 1 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 KASPIKZ 1 will offset losses from the drop in KASPIKZ 1's long position.

The idea behind Volkswagen AG VZO and KASPIKZ 1 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.