Correlation Between Volkswagen and Aeon

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

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

Diversification Opportunities for Volkswagen and Aeon

-0.37

Correlation Coefficient

Volkswagen  Aeon

Very good diversification

The 3 months correlation between Volkswagen and Aeon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon 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 Pref are associated (or correlated) with Aeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon has no effect on the direction of Volkswagen i.e., Volkswagen and Aeon go up and down completely randomly.

Pair Corralation between Volkswagen and Aeon

Assuming the 90 days horizon Volkswagen AG Pref is expected to under-perform the Aeon. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG Pref is 58.35 times less risky than Aeon. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Aeon Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Aeon Co on October 5, 2024 and sell it today you would earn a total of  1,912  from holding Aeon Co or generate 1249.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.84%
Values	Daily Returns

Volkswagen AG Pref  vs.  Aeon Co

Volkswagen AG Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG Pref has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Volkswagen and Aeon

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

The idea behind Volkswagen AG Pref and Aeon 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.