Correlation Between Volkswagen and Oak Ridge

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

By analyzing existing cross correlation between Volkswagen AG 110 and Oak Ridge Financial, you can compare the effects of market volatilities on Volkswagen and Oak Ridge 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 Oak Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Oak Ridge.

Diversification Opportunities for Volkswagen and Oak Ridge

-0.87

Correlation Coefficient

Volkswagen  Oak Ridge

Pay attention - limited upside

The 3 months correlation between Volkswagen and Oak is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Oak Ridge Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Financial 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 110 are associated (or correlated) with Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Financial has no effect on the direction of Volkswagen i.e., Volkswagen and Oak Ridge go up and down completely randomly.

Pair Corralation between Volkswagen and Oak Ridge

Assuming the 90 days horizon Volkswagen AG 110 is expected to generate 1.95 times more return on investment than Oak Ridge. However, Volkswagen is 1.95 times more volatile than Oak Ridge Financial. It trades about 0.2 of its potential returns per unit of risk. Oak Ridge Financial is currently generating about 0.15 per unit of risk. If you would invest  874.00  in Volkswagen AG 110 on September 22, 2024 and sell it today you would earn a total of  41.00  from holding Volkswagen AG 110 or generate 4.69% return on investment over 90 days.

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

Volkswagen AG 110  vs.  Oak Ridge Financial

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Oak Ridge Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Ridge Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Oak Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volkswagen and Oak Ridge

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

The idea behind Volkswagen AG 110 and Oak Ridge Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.