Correlation Between Volkswagen and Strix Group

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

Diversification Opportunities for Volkswagen and Strix Group

-0.23

Correlation Coefficient

Volkswagen  Strix Group

Very good diversification

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

Pair Corralation between Volkswagen and Strix Group

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to generate 0.65 times more return on investment than Strix Group. However, Volkswagen AG VZO is 1.54 times less risky than Strix Group. It trades about 0.29 of its potential returns per unit of risk. Strix Group Plc is currently generating about -0.07 per unit of risk. If you would invest  8,062  in Volkswagen AG VZO on November 28, 2024 and sell it today you would earn a total of  2,433  from holding Volkswagen AG VZO or generate 30.18% return on investment over 90 days.

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

Volkswagen AG VZO  vs.  Strix Group Plc

Volkswagen AG VZO

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG VZO are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Volkswagen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Strix Group Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strix Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Volkswagen and Strix Group

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

The idea behind Volkswagen AG VZO and Strix Group Plc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.