Correlation Between USWE SPORTS and Mercedes-Benz Group

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Can any of the company-specific risk be diversified away by investing in both USWE SPORTS and Mercedes-Benz Group 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 USWE SPORTS and Mercedes-Benz Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USWE SPORTS AB and Mercedes Benz Group AG, you can compare the effects of market volatilities on USWE SPORTS and Mercedes-Benz Group 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 USWE SPORTS with a short position of Mercedes-Benz Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and Mercedes-Benz Group.

Diversification Opportunities for USWE SPORTS and Mercedes-Benz Group

-0.86
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between USWE SPORTS and Mercedes-Benz Group

Assuming the 90 days horizon USWE SPORTS AB is expected to under-perform the Mercedes-Benz Group. In addition to that, USWE SPORTS is 2.52 times more volatile than Mercedes Benz Group AG. It trades about -0.07 of its total potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.02 per unit of volatility. If you would invest  5,824  in Mercedes Benz Group AG on September 5, 2024 and sell it today you would lose (541.00) from holding Mercedes Benz Group AG or give up 9.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

USWE SPORTS AB  vs.  Mercedes Benz Group AG

 Performance 
       Timeline  
USWE SPORTS AB 

Risk-Adjusted Performance

12 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mercedes Benz Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

USWE SPORTS and Mercedes-Benz Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with USWE SPORTS and Mercedes-Benz Group

The main advantage of trading using opposite USWE SPORTS and Mercedes-Benz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USWE SPORTS position performs unexpectedly, Mercedes-Benz Group 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 Mercedes-Benz Group will offset losses from the drop in Mercedes-Benz Group's long position.
The idea behind USWE SPORTS AB and Mercedes Benz Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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