Correlation Between Volkswagen and PHENIXFIN

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

Diversification Opportunities for Volkswagen and PHENIXFIN

0.23

Correlation Coefficient

Volkswagen  PHENIXFIN

Modest diversification

The 3 months correlation between Volkswagen and PHENIXFIN is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and PHENIXFIN P DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHENIXFIN P DL 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 PHENIXFIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHENIXFIN P DL has no effect on the direction of Volkswagen i.e., Volkswagen and PHENIXFIN go up and down completely randomly.

Pair Corralation between Volkswagen and PHENIXFIN

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to under-perform the PHENIXFIN. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG VZO is 1.1 times less risky than PHENIXFIN. The stock trades about -0.07 of its potential returns per unit of risk. The PHENIXFIN P DL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,240  in PHENIXFIN P DL on October 8, 2024 and sell it today you would earn a total of  540.00  from holding PHENIXFIN P DL or generate 12.74% return on investment over 90 days.

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

Volkswagen AG VZO  vs.  PHENIXFIN P DL

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.

PHENIXFIN P DL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PHENIXFIN P DL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PHENIXFIN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and PHENIXFIN

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

The idea behind Volkswagen AG VZO and PHENIXFIN P DL 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.