Correlation Between TRAVEL + and Volkswagen

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Volkswagen AG, you can compare the effects of market volatilities on TRAVEL + and Volkswagen 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 TRAVEL + with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Volkswagen.

Diversification Opportunities for TRAVEL + and Volkswagen

-0.91

Correlation Coefficient

TRAVEL +  Volkswagen

Pay attention - limited upside

The 3 months correlation between TRAVEL and Volkswagen is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of TRAVEL + i.e., TRAVEL + and Volkswagen go up and down completely randomly.

Pair Corralation between TRAVEL + and Volkswagen

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.07 times more return on investment than Volkswagen. However, TRAVEL + is 1.07 times more volatile than Volkswagen AG. It trades about 0.08 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of risk. If you would invest  3,473  in TRAVEL LEISURE DL 01 on October 5, 2024 and sell it today you would earn a total of  1,347  from holding TRAVEL LEISURE DL 01 or generate 38.78% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Volkswagen AG

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with TRAVEL + and Volkswagen

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

The idea behind TRAVEL LEISURE DL 01 and Volkswagen AG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.