Correlation Between VOLKSWAGEN and ROMERIKE SPAREBANK

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

By analyzing existing cross correlation between VOLKSWAGEN AG VZ and ROMERIKE SPAREBANK NK, you can compare the effects of market volatilities on VOLKSWAGEN and ROMERIKE SPAREBANK 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 ROMERIKE SPAREBANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLKSWAGEN and ROMERIKE SPAREBANK.

Diversification Opportunities for VOLKSWAGEN and ROMERIKE SPAREBANK

0.75

Correlation Coefficient

VOLKSWAGEN  ROMERIKE SPAREBANK

Poor diversification

The 3 months correlation between VOLKSWAGEN and ROMERIKE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and ROMERIKE SPAREBANK NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROMERIKE SPAREBANK 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 VZ are associated (or correlated) with ROMERIKE SPAREBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROMERIKE SPAREBANK has no effect on the direction of VOLKSWAGEN i.e., VOLKSWAGEN and ROMERIKE SPAREBANK go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and ROMERIKE SPAREBANK

Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to generate 2.14 times more return on investment than ROMERIKE SPAREBANK. However, VOLKSWAGEN is 2.14 times more volatile than ROMERIKE SPAREBANK NK. It trades about 0.14 of its potential returns per unit of risk. ROMERIKE SPAREBANK NK is currently generating about 0.25 per unit of risk. If you would invest  870.00  in VOLKSWAGEN AG VZ on December 25, 2024 and sell it today you would earn a total of  150.00  from holding VOLKSWAGEN AG VZ or generate 17.24% return on investment over 90 days.

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

VOLKSWAGEN AG VZ  vs.  ROMERIKE SPAREBANK NK

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VOLKSWAGEN AG VZ are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VOLKSWAGEN reported solid returns over the last few months and may actually be approaching a breakup point.

ROMERIKE SPAREBANK

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ROMERIKE SPAREBANK NK are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, ROMERIKE SPAREBANK reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VOLKSWAGEN and ROMERIKE SPAREBANK

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

The idea behind VOLKSWAGEN AG VZ and ROMERIKE SPAREBANK NK 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.