Correlation Between VOLKSWAGEN and USS

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

Diversification Opportunities for VOLKSWAGEN and USS

-0.62

Correlation Coefficient

VOLKSWAGEN  USS

Excellent diversification

The 3 months correlation between VOLKSWAGEN and USS is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of VOLKSWAGEN i.e., VOLKSWAGEN and USS go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and USS

Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to under-perform the USS. In addition to that, VOLKSWAGEN is 1.17 times more volatile than USS Co. It trades about -0.01 of its total potential returns per unit of risk. USS Co is currently generating about 0.03 per unit of volatility. If you would invest  705.00  in USS Co on October 4, 2024 and sell it today you would earn a total of  135.00  from holding USS Co or generate 19.15% 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.  USS Co

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 nearly stable basic indicators, VOLKSWAGEN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

USS Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USS Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, USS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VOLKSWAGEN and USS

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

The idea behind VOLKSWAGEN AG VZ and USS Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.