Correlation Between Bridgestone Corp and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Bridgestone Corp and Bayerische Motoren 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 Bridgestone Corp and Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone Corp ADR and Bayerische Motoren Werke, you can compare the effects of market volatilities on Bridgestone Corp and Bayerische Motoren 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 Bridgestone Corp with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone Corp and Bayerische Motoren.
Diversification Opportunities for Bridgestone Corp and Bayerische Motoren
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bridgestone and Bayerische is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone Corp ADR and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and Bridgestone Corp 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 Bridgestone Corp ADR are associated (or correlated) with Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Bridgestone Corp i.e., Bridgestone Corp and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Bridgestone Corp and Bayerische Motoren
Assuming the 90 days horizon Bridgestone Corp ADR is expected to generate 0.6 times more return on investment than Bayerische Motoren. However, Bridgestone Corp ADR is 1.68 times less risky than Bayerische Motoren. It trades about -0.2 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.26 per unit of risk. If you would invest 1,917 in Bridgestone Corp ADR on August 28, 2024 and sell it today you would lose (176.00) from holding Bridgestone Corp ADR or give up 9.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgestone Corp ADR vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Bridgestone Corp ADR |
| Bayerische Motoren Werke |
Bridgestone Corp and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone Corp and Bayerische Motoren
The main advantage of trading using opposite Bridgestone Corp and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone Corp position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Bridgestone Corp vs. Allison Transmission Holdings | Bridgestone Corp vs. Luminar Technologies | Bridgestone Corp vs. Lear Corporation | Bridgestone Corp vs. BorgWarner |
| 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 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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