Correlation Between Volkswagen and MEBUKI FINANCIAL

Can any of the company-specific risk be diversified away by investing in both Volkswagen and MEBUKI FINANCIAL 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 MEBUKI FINANCIAL 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 MEBUKI FINANCIAL GROUP, you can compare the effects of market volatilities on Volkswagen and MEBUKI FINANCIAL 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 MEBUKI FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and MEBUKI FINANCIAL.

Diversification Opportunities for Volkswagen and MEBUKI FINANCIAL

-0.86

Correlation Coefficient

Volkswagen  MEBUKI FINANCIAL

Pay attention - limited upside

The 3 months correlation between Volkswagen and MEBUKI is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO and MEBUKI FINANCIAL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEBUKI FINANCIAL 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 MEBUKI FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEBUKI FINANCIAL has no effect on the direction of Volkswagen i.e., Volkswagen and MEBUKI FINANCIAL go up and down completely randomly.

Pair Corralation between Volkswagen and MEBUKI FINANCIAL

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to under-perform the MEBUKI FINANCIAL. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG VZO is 1.41 times less risky than MEBUKI FINANCIAL. The stock trades about -0.04 of its potential returns per unit of risk. The MEBUKI FINANCIAL GROUP is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  338.00  in MEBUKI FINANCIAL GROUP on September 17, 2024 and sell it today you would earn a total of  74.00  from holding MEBUKI FINANCIAL GROUP or generate 21.89% return on investment over 90 days.

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

Volkswagen AG VZO  vs.  MEBUKI FINANCIAL GROUP

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. In spite of rather sound basic indicators, Volkswagen is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MEBUKI FINANCIAL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MEBUKI FINANCIAL GROUP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MEBUKI FINANCIAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volkswagen and MEBUKI FINANCIAL

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

The idea behind Volkswagen AG VZO and MEBUKI FINANCIAL GROUP 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.