Correlation Between State Bank and Volkswagen

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

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

Diversification Opportunities for State Bank and Volkswagen

-0.73

Correlation Coefficient

State Bank  Volkswagen

Pay attention - limited upside

The 3 months correlation between State and Volkswagen is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and State Bank 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 State Bank of 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 State Bank i.e., State Bank and Volkswagen go up and down completely randomly.

Pair Corralation between State Bank and Volkswagen

Assuming the 90 days horizon State Bank of is expected to generate 1.16 times more return on investment than Volkswagen. However, State Bank is 1.16 times more volatile than Volkswagen AG. It trades about 0.04 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.17 per unit of risk. If you would invest  8,950  in State Bank of on September 3, 2024 and sell it today you would earn a total of  300.00  from holding State Bank of or generate 3.35% return on investment over 90 days.

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

State Bank of  vs.  Volkswagen AG

State Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with State Bank and Volkswagen

The main advantage of trading using opposite State Bank and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank 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 State Bank of 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.