Correlation Between Bayerische Motoren and Ferrari NV
Can any of the company-specific risk be diversified away by investing in both Bayerische Motoren and Ferrari NV 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 Bayerische Motoren and Ferrari NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayerische Motoren Werke and Ferrari NV, you can compare the effects of market volatilities on Bayerische Motoren and Ferrari NV 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 Bayerische Motoren with a short position of Ferrari NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Ferrari NV.
Diversification Opportunities for Bayerische Motoren and Ferrari NV
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bayerische and Ferrari is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV and Bayerische Motoren 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 Bayerische Motoren Werke are associated (or correlated) with Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Ferrari NV go up and down completely randomly.
Pair Corralation between Bayerische Motoren and Ferrari NV
Assuming the 90 days horizon Bayerische Motoren Werke is expected to under-perform the Ferrari NV. In addition to that, Bayerische Motoren is 1.17 times more volatile than Ferrari NV. It trades about -0.28 of its total potential returns per unit of risk. Ferrari NV is currently generating about -0.27 per unit of volatility. If you would invest 49,048 in Ferrari NV on August 28, 2024 and sell it today you would lose (5,524) from holding Ferrari NV or give up 11.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bayerische Motoren Werke vs. Ferrari NV
Performance |
| Timeline |
| Bayerische Motoren Werke |
| Ferrari NV |
Bayerische Motoren and Ferrari NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayerische Motoren and Ferrari NV
The main advantage of trading using opposite Bayerische Motoren and Ferrari NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren position performs unexpectedly, Ferrari NV 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 Ferrari NV will offset losses from the drop in Ferrari NV's long position.| Bayerische Motoren vs. Mercedes Benz Group AG | Bayerische Motoren vs. Porsche Automobile Holding | Bayerische Motoren vs. Volkswagen AG 110 | Bayerische Motoren vs. Mercedes Benz Group AG |
| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Bayerische Motoren Werke |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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