Correlation Between Volkswagen and Genesis Electronics

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

Diversification Opportunities for Volkswagen and Genesis Electronics

-0.02

Correlation Coefficient

Volkswagen  Genesis Electronics

Good diversification

The 3 months correlation between Volkswagen and Genesis is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Genesis Electronics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Electronics 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 Genesis Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Electronics has no effect on the direction of Volkswagen i.e., Volkswagen and Genesis Electronics go up and down completely randomly.

Pair Corralation between Volkswagen and Genesis Electronics

Assuming the 90 days horizon Volkswagen is expected to generate 3.5 times less return on investment than Genesis Electronics. But when comparing it to its historical volatility, Volkswagen AG Pref is 7.23 times less risky than Genesis Electronics. It trades about 0.12 of its potential returns per unit of risk. Genesis Electronics Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Genesis Electronics Group on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Genesis Electronics Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Volkswagen AG Pref  vs.  Genesis Electronics Group

Volkswagen AG Pref

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG Pref are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Volkswagen showed solid returns over the last few months and may actually be approaching a breakup point.

Genesis Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Electronics Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, Genesis Electronics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and Genesis Electronics

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

The idea behind Volkswagen AG Pref and Genesis Electronics Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.