Correlation Between Jardine Cycle and Volkswagen

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

By analyzing existing cross correlation between Jardine Cycle Carriage and Volkswagen AG 110, you can compare the effects of market volatilities on Jardine Cycle 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 Jardine Cycle with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jardine Cycle and Volkswagen.

Diversification Opportunities for Jardine Cycle and Volkswagen

0.53

Correlation Coefficient

Jardine Cycle  Volkswagen

Very weak diversification

The 3 months correlation between Jardine and Volkswagen is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Jardine Cycle Carriage and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 and Jardine Cycle 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 Jardine Cycle Carriage 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 110 has no effect on the direction of Jardine Cycle i.e., Jardine Cycle and Volkswagen go up and down completely randomly.

Pair Corralation between Jardine Cycle and Volkswagen

Assuming the 90 days horizon Jardine Cycle Carriage is expected to generate 0.73 times more return on investment than Volkswagen. However, Jardine Cycle Carriage is 1.37 times less risky than Volkswagen. It trades about -0.06 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.12 per unit of risk. If you would invest  2,060  in Jardine Cycle Carriage on September 17, 2024 and sell it today you would lose (110.00) from holding Jardine Cycle Carriage or give up 5.34% of portfolio value over 90 days.

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

Jardine Cycle Carriage  vs.  Volkswagen AG 110

Jardine Cycle Carriage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jardine Cycle Carriage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Jardine Cycle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jardine Cycle and Volkswagen

The main advantage of trading using opposite Jardine Cycle and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jardine Cycle 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 Jardine Cycle Carriage and Volkswagen AG 110 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.