Correlation Between Volkswagen and Hong Yuan

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

Diversification Opportunities for Volkswagen and Hong Yuan

-0.76

Correlation Coefficient

Volkswagen  Hong Yuan

Pay attention - limited upside

The 3 months correlation between Volkswagen and Hong is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Pref and Hong Yuan Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Yuan Holding 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 Hong Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Yuan Holding has no effect on the direction of Volkswagen i.e., Volkswagen and Hong Yuan go up and down completely randomly.

Pair Corralation between Volkswagen and Hong Yuan

Assuming the 90 days horizon Volkswagen AG Pref is expected to under-perform the Hong Yuan. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG Pref is 20.13 times less risky than Hong Yuan. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Hong Yuan Holding is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Hong Yuan Holding on September 14, 2024 and sell it today you would earn a total of  3.40  from holding Hong Yuan Holding or generate 212.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Volkswagen AG Pref  vs.  Hong Yuan Holding

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.

Hong Yuan Holding

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Volkswagen and Hong Yuan

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

The idea behind Volkswagen AG Pref and Hong Yuan Holding 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.