Correlation Between Somero Enterprise and Volkswagen

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

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

Diversification Opportunities for Somero Enterprise and Volkswagen

0.03

Correlation Coefficient

Somero Enterprise  Volkswagen

Significant diversification

The 3 months correlation between Somero and Volkswagen is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Somero Enterprise and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Somero Enterprise 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 Somero Enterprise 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 Somero Enterprise i.e., Somero Enterprise and Volkswagen go up and down completely randomly.

Pair Corralation between Somero Enterprise and Volkswagen

Assuming the 90 days trading horizon Somero Enterprise is expected to generate 2.33 times more return on investment than Volkswagen. However, Somero Enterprise is 2.33 times more volatile than Volkswagen AG. It trades about 0.36 of its potential returns per unit of risk. Volkswagen AG is currently generating about 0.35 per unit of risk. If you would invest  26,000  in Somero Enterprise on September 30, 2024 and sell it today you would earn a total of  6,300  from holding Somero Enterprise or generate 24.23% return on investment over 90 days.

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

Somero Enterprise  vs.  Volkswagen AG

Somero Enterprise

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Somero Enterprise are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Somero Enterprise exhibited 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. 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.

Pair Trading with Somero Enterprise and Volkswagen

The main advantage of trading using opposite Somero Enterprise and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Somero Enterprise 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 Somero Enterprise 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.