Correlation Between RMS Mezzanine and Volkswagen

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

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

Diversification Opportunities for RMS Mezzanine and Volkswagen

0.08

Correlation Coefficient

RMS Mezzanine  Volkswagen

Significant diversification

The 3 months correlation between RMS and Volkswagen is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding RMS Mezzanine AS and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and RMS Mezzanine 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 RMS Mezzanine AS 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 RMS Mezzanine i.e., RMS Mezzanine and Volkswagen go up and down completely randomly.

Pair Corralation between RMS Mezzanine and Volkswagen

Assuming the 90 days trading horizon RMS Mezzanine AS is expected to generate 5.84 times more return on investment than Volkswagen. However, RMS Mezzanine is 5.84 times more volatile than Volkswagen AG. It trades about 0.05 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.04 per unit of risk. If you would invest  198.00  in RMS Mezzanine AS on August 31, 2024 and sell it today you would lose (31.00) from holding RMS Mezzanine AS or give up 15.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

RMS Mezzanine AS  vs.  Volkswagen AG

RMS Mezzanine AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RMS Mezzanine AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, RMS Mezzanine 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. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with RMS Mezzanine and Volkswagen

The main advantage of trading using opposite RMS Mezzanine and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMS Mezzanine 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 RMS Mezzanine AS 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 CEOs Directory module to screen CEOs from public companies around the world.