Correlation Between AP Moeller and Volkswagen

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

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

Diversification Opportunities for AP Moeller and Volkswagen

-0.44

Correlation Coefficient

AP Moeller  Volkswagen

Very good diversification

The 3 months correlation between 0O76 and Volkswagen is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller Maersk AS and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and AP Moeller 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 AP Moeller Maersk AS 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 AP Moeller i.e., AP Moeller and Volkswagen go up and down completely randomly.

Pair Corralation between AP Moeller and Volkswagen

Assuming the 90 days trading horizon AP Moeller Maersk AS is expected to generate 1.65 times more return on investment than Volkswagen. However, AP Moeller is 1.65 times more volatile than Volkswagen AG. It trades about 0.0 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.41 per unit of risk. If you would invest  944,000  in AP Moeller Maersk AS on February 4, 2024 and sell it today you would lose (6,750) from holding AP Moeller Maersk AS or give up 0.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

AP Moeller Maersk AS  vs.  Volkswagen AG

AP Moeller Maersk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP Moeller Maersk AS 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 basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. Despite quite persistent basic indicators, Volkswagen is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AP Moeller and Volkswagen

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.