Correlation Between Volkswagen and Citizens Bancshares

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

By analyzing existing cross correlation between Volkswagen AG VZO and Citizens Bancshares Corp, you can compare the effects of market volatilities on Volkswagen and Citizens Bancshares 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 Citizens Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Citizens Bancshares.

Diversification Opportunities for Volkswagen and Citizens Bancshares

-0.38

Correlation Coefficient

Volkswagen  Citizens Bancshares

Very good diversification

The 3 months correlation between Volkswagen and Citizens is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and Citizens Bancshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancshares Corp 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 VZO are associated (or correlated) with Citizens Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancshares Corp has no effect on the direction of Volkswagen i.e., Volkswagen and Citizens Bancshares go up and down completely randomly.

Pair Corralation between Volkswagen and Citizens Bancshares

Assuming the 90 days horizon Volkswagen AG VZO is expected to under-perform the Citizens Bancshares. In addition to that, Volkswagen is 1.19 times more volatile than Citizens Bancshares Corp. It trades about -0.01 of its total potential returns per unit of risk. Citizens Bancshares Corp is currently generating about 0.07 per unit of volatility. If you would invest  2,654  in Citizens Bancshares Corp on September 28, 2024 and sell it today you would earn a total of  2,413  from holding Citizens Bancshares Corp or generate 90.92% return on investment over 90 days.

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

Volkswagen AG VZO  vs.  Citizens Bancshares Corp

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Citizens Bancshares Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens Bancshares Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Citizens Bancshares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Volkswagen and Citizens Bancshares

The main advantage of trading using opposite Volkswagen and Citizens Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen position performs unexpectedly, Citizens Bancshares 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 Citizens Bancshares will offset losses from the drop in Citizens Bancshares' long position.

The idea behind Volkswagen AG VZO and Citizens Bancshares Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.