Correlation Between VOLKSWAGEN and Hubbell Incorporated

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

Diversification Opportunities for VOLKSWAGEN and Hubbell Incorporated

-0.68

Correlation Coefficient

VOLKSWAGEN  Hubbell Incorporated

Excellent diversification

The 3 months correlation between VOLKSWAGEN and Hubbell is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and Hubbell Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubbell Incorporated 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 Hubbell Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubbell Incorporated has no effect on the direction of VOLKSWAGEN i.e., VOLKSWAGEN and Hubbell Incorporated go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and Hubbell Incorporated

Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to under-perform the Hubbell Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, VOLKSWAGEN AG VZ is 1.31 times less risky than Hubbell Incorporated. The stock trades about -0.17 of its potential returns per unit of risk. The Hubbell Incorporated is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  35,400  in Hubbell Incorporated on August 30, 2024 and sell it today you would earn a total of  8,600  from holding Hubbell Incorporated or generate 24.29% return on investment over 90 days.

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

VOLKSWAGEN AG VZ  vs.  Hubbell Incorporated

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOLKSWAGEN AG VZ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hubbell Incorporated

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubbell Incorporated are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Hubbell Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VOLKSWAGEN and Hubbell Incorporated

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

The idea behind VOLKSWAGEN AG VZ and Hubbell Incorporated 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 Stocks Directory module to find actively traded stocks across global markets.