Correlation Between Volkswagen and GreenPower

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

Diversification Opportunities for Volkswagen and GreenPower

-0.72

Correlation Coefficient

Volkswagen  GreenPower

Pay attention - limited upside

The 3 months correlation between Volkswagen and GreenPower is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor 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 GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Volkswagen i.e., Volkswagen and GreenPower go up and down completely randomly.

Pair Corralation between Volkswagen and GreenPower

Assuming the 90 days horizon Volkswagen AG Pref is expected to generate 0.31 times more return on investment than GreenPower. However, Volkswagen AG Pref is 3.25 times less risky than GreenPower. It trades about 0.24 of its potential returns per unit of risk. GreenPower Motor is currently generating about -0.14 per unit of risk. If you would invest  843.00  in Volkswagen AG Pref on December 1, 2024 and sell it today you would earn a total of  228.00  from holding Volkswagen AG Pref or generate 27.05% return on investment over 90 days.

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

Volkswagen AG Pref  vs.  GreenPower Motor

Volkswagen AG Pref

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG Pref are ranked lower than 18 (%) 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.

GreenPower Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Volkswagen and GreenPower

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

The idea behind Volkswagen AG Pref and GreenPower Motor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.