Correlation Between BYD Company and MERCEDES-BENZ GRP
Can any of the company-specific risk be diversified away by investing in both BYD Company and MERCEDES-BENZ GRP 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 BYD Company and MERCEDES-BENZ GRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Company Limited and MERCEDES BENZ GRP ADR14, you can compare the effects of market volatilities on BYD Company and MERCEDES-BENZ GRP 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 BYD Company with a short position of MERCEDES-BENZ GRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and MERCEDES-BENZ GRP.
Diversification Opportunities for BYD Company and MERCEDES-BENZ GRP
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BYD and MERCEDES-BENZ is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and MERCEDES BENZ GRP ADR14 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MERCEDES BENZ GRP and BYD Company 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 BYD Company Limited are associated (or correlated) with MERCEDES-BENZ GRP. 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 GRP has no effect on the direction of BYD Company i.e., BYD Company and MERCEDES-BENZ GRP go up and down completely randomly.
Pair Corralation between BYD Company and MERCEDES-BENZ GRP
Assuming the 90 days horizon BYD Company Limited is expected to generate 1.14 times more return on investment than MERCEDES-BENZ GRP. However, BYD Company is 1.14 times more volatile than MERCEDES BENZ GRP ADR14. It trades about 0.06 of its potential returns per unit of risk. MERCEDES BENZ GRP ADR14 is currently generating about 0.01 per unit of risk. If you would invest 1,969 in BYD Company Limited on September 12, 2024 and sell it today you would earn a total of 1,457 from holding BYD Company Limited or generate 74.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Company Limited vs. MERCEDES BENZ GRP ADR14
Performance |
| Timeline |
| BYD Limited |
| MERCEDES BENZ GRP |
BYD Company and MERCEDES-BENZ GRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and MERCEDES-BENZ GRP
The main advantage of trading using opposite BYD Company and MERCEDES-BENZ GRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, MERCEDES-BENZ GRP 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 GRP will offset losses from the drop in MERCEDES-BENZ GRP's long position.| BYD Company vs. Xiaomi | BYD Company vs. Geely Automobile Holdings | BYD Company vs. Nel ASA | BYD Company vs. JinkoSolar Holding Co |
| MERCEDES-BENZ GRP vs. DiamondRock Hospitality | MERCEDES-BENZ GRP vs. COFCO Joycome Foods | MERCEDES-BENZ GRP vs. Lifeway Foods | MERCEDES-BENZ GRP vs. Perseus Mining Limited |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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