Correlation Between VOLKSWAGEN and Square

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

Diversification Opportunities for VOLKSWAGEN and Square

-0.8

Correlation Coefficient

VOLKSWAGEN  Square

Pay attention - limited upside

The 3 months correlation between VOLKSWAGEN and Square is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and Square Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Inc 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 Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Inc has no effect on the direction of VOLKSWAGEN i.e., VOLKSWAGEN and Square go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and Square

Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to generate 0.49 times more return on investment than Square. However, VOLKSWAGEN AG VZ is 2.03 times less risky than Square. It trades about 0.11 of its potential returns per unit of risk. Square Inc is currently generating about 0.01 per unit of risk. If you would invest  860.00  in VOLKSWAGEN AG VZ on December 10, 2024 and sell it today you would earn a total of  200.00  from holding VOLKSWAGEN AG VZ or generate 23.26% return on investment over 90 days.

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

VOLKSWAGEN AG VZ  vs.  Square Inc

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

Solid

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

Square Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Square Inc 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with VOLKSWAGEN and Square

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

The idea behind VOLKSWAGEN AG VZ and Square Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.