Correlation Between VOLKSWAGEN and WILLIS LEASE

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

Diversification Opportunities for VOLKSWAGEN and WILLIS LEASE

-0.52

Correlation Coefficient

VOLKSWAGEN  WILLIS LEASE

Excellent diversification

The 3 months correlation between VOLKSWAGEN and WILLIS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of VOLKSWAGEN i.e., VOLKSWAGEN and WILLIS LEASE go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and WILLIS LEASE

Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to generate 1.22 times more return on investment than WILLIS LEASE. However, VOLKSWAGEN is 1.22 times more volatile than WILLIS LEASE FIN. It trades about 0.16 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.01 per unit of risk. If you would invest  970.00  in VOLKSWAGEN AG VZ on November 29, 2024 and sell it today you would earn a total of  70.00  from holding VOLKSWAGEN AG VZ or generate 7.22% return on investment over 90 days.

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

VOLKSWAGEN AG VZ  vs.  WILLIS LEASE FIN

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 22 (%) 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.

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 WILLIS LEASE

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

The idea behind VOLKSWAGEN AG VZ and WILLIS LEASE FIN 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.