Correlation Between Volkswagen and Southern Michigan
Can any of the company-specific risk be diversified away by investing in both Volkswagen and Southern Michigan 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 Volkswagen and Southern Michigan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and Southern Michigan Bancorp, you can compare the effects of market volatilities on Volkswagen and Southern Michigan 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 Volkswagen with a short position of Southern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Southern Michigan.
Diversification Opportunities for Volkswagen and Southern Michigan
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and Southern is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Southern Michigan Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Michigan Bancorp and Volkswagen 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 Volkswagen AG are associated (or correlated) with Southern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Michigan Bancorp has no effect on the direction of Volkswagen i.e., Volkswagen and Southern Michigan go up and down completely randomly.
Pair Corralation between Volkswagen and Southern Michigan
Assuming the 90 days horizon Volkswagen AG is expected to under-perform the Southern Michigan. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.33 times less risky than Southern Michigan. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Southern Michigan Bancorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,993 in Southern Michigan Bancorp on September 26, 2024 and sell it today you would lose (68.00) from holding Southern Michigan Bancorp or give up 3.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 88.71% |
Values | Daily Returns |
Volkswagen AG vs. Southern Michigan Bancorp
Performance |
Timeline |
Volkswagen AG |
Southern Michigan Bancorp |
Volkswagen and Southern Michigan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Volkswagen and Southern Michigan
The main advantage of trading using opposite Volkswagen and Southern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Southern Michigan 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 Southern Michigan will offset losses from the drop in Southern Michigan's long position.Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Bayerische Motoren Werke |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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