Correlation Between Volkswagen and Stellantis

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

By analyzing existing cross correlation between Volkswagen AG 110 and Stellantis NV, you can compare the effects of market volatilities on Volkswagen and Stellantis 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 Stellantis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Stellantis.

Diversification Opportunities for Volkswagen and Stellantis

0.6

Correlation Coefficient

Volkswagen  Stellantis

Poor diversification

The 3 months correlation between Volkswagen and Stellantis is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and Stellantis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellantis NV 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 110 are associated (or correlated) with Stellantis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellantis NV has no effect on the direction of Volkswagen i.e., Volkswagen and Stellantis go up and down completely randomly.

Pair Corralation between Volkswagen and Stellantis

Assuming the 90 days horizon Volkswagen AG 110 is expected to under-perform the Stellantis. But the pink sheet apears to be less risky and, when comparing its historical volatility, Volkswagen AG 110 is 1.95 times less risky than Stellantis. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Stellantis NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Stellantis NV on September 12, 2024 and sell it today you would earn a total of  30.00  from holding Stellantis NV or generate 2.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Volkswagen AG 110  vs.  Stellantis NV

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Stellantis is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Volkswagen and Stellantis

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

The idea behind Volkswagen AG 110 and Stellantis NV 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.