Correlation Between Volkswagen and SANTANDER

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

By analyzing existing cross correlation between Volkswagen AG and SANTANDER UK 8, you can compare the effects of market volatilities on Volkswagen and SANTANDER 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 SANTANDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and SANTANDER.

Diversification Opportunities for Volkswagen and SANTANDER

0.28

Correlation Coefficient

Volkswagen  SANTANDER

Modest diversification

The 3 months correlation between Volkswagen and SANTANDER is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and SANTANDER UK 8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER UK 8 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 are associated (or correlated) with SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER UK 8 has no effect on the direction of Volkswagen i.e., Volkswagen and SANTANDER go up and down completely randomly.

Pair Corralation between Volkswagen and SANTANDER

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the SANTANDER. In addition to that, Volkswagen is 10.54 times more volatile than SANTANDER UK 8. It trades about -0.08 of its total potential returns per unit of risk. SANTANDER UK 8 is currently generating about 0.0 per unit of volatility. If you would invest  13,550  in SANTANDER UK 8 on September 17, 2024 and sell it today you would earn a total of  0.00  from holding SANTANDER UK 8 or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Volkswagen AG  vs.  SANTANDER UK 8

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 uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SANTANDER UK 8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SANTANDER UK 8 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SANTANDER is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Volkswagen and SANTANDER

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

The idea behind Volkswagen AG and SANTANDER UK 8 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.