Correlation Between Volkswagen and Benchmark Bankshares

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

Diversification Opportunities for Volkswagen and Benchmark Bankshares

-0.64

Correlation Coefficient

Volkswagen  Benchmark Bankshares

Excellent diversification

The 3 months correlation between Volkswagen and Benchmark is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Benchmark Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Bankshares 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 Benchmark Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Bankshares has no effect on the direction of Volkswagen i.e., Volkswagen and Benchmark Bankshares go up and down completely randomly.

Pair Corralation between Volkswagen and Benchmark Bankshares

Assuming the 90 days horizon Volkswagen is expected to generate 9.16 times less return on investment than Benchmark Bankshares. In addition to that, Volkswagen is 1.03 times more volatile than Benchmark Bankshares. It trades about 0.03 of its total potential returns per unit of risk. Benchmark Bankshares is currently generating about 0.29 per unit of volatility. If you would invest  2,379  in Benchmark Bankshares on October 14, 2024 and sell it today you would earn a total of  163.00  from holding Benchmark Bankshares or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.47%
Values	Daily Returns

Volkswagen AG Pref  vs.  Benchmark Bankshares

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.

Benchmark Bankshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Bankshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Benchmark Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and Benchmark Bankshares

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

The idea behind Volkswagen AG Pref and Benchmark Bankshares 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.