Correlation Between IMPERIAL TOBACCO and Volkswagen
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Volkswagen AG, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Volkswagen.
Diversification Opportunities for IMPERIAL TOBACCO and Volkswagen
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IMPERIAL and Volkswagen is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Volkswagen go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Volkswagen
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.84 times more return on investment than Volkswagen. However, IMPERIAL TOBACCO is 1.19 times less risky than Volkswagen. It trades about 0.26 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of risk. If you would invest 2,559 in IMPERIAL TOBACCO on September 24, 2024 and sell it today you would earn a total of 522.00 from holding IMPERIAL TOBACCO or generate 20.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
IMPERIAL TOBACCO vs. Volkswagen AG
Performance |
Timeline |
IMPERIAL TOBACCO |
Volkswagen AG |
IMPERIAL TOBACCO and Volkswagen Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IMPERIAL TOBACCO and Volkswagen
The main advantage of trading using opposite IMPERIAL TOBACCO and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.IMPERIAL TOBACCO vs. Tianjin Capital Environmental | IMPERIAL TOBACCO vs. CarsalesCom | IMPERIAL TOBACCO vs. Khiron Life Sciences | IMPERIAL TOBACCO vs. ALGOMA STEEL GROUP |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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