Correlation Between Bayerische Motoren and Isuzu Motors
Can any of the company-specific risk be diversified away by investing in both Bayerische Motoren and Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors, you can compare the effects of market volatilities on Bayerische Motoren and Isuzu Motors 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 Isuzu Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Isuzu Motors.
Diversification Opportunities for Bayerische Motoren and Isuzu Motors
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bayerische and Isuzu is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Isuzu Motors go up and down completely randomly.
Pair Corralation between Bayerische Motoren and Isuzu Motors
Assuming the 90 days horizon Bayerische Motoren Werke is expected to under-perform the Isuzu Motors. In addition to that, Bayerische Motoren is 1.78 times more volatile than Isuzu Motors. It trades about -0.31 of its total potential returns per unit of risk. Isuzu Motors is currently generating about 0.08 per unit of volatility. If you would invest 1,292 in Isuzu Motors on August 28, 2024 and sell it today you would earn a total of 35.00 from holding Isuzu Motors or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayerische Motoren Werke vs. Isuzu Motors
Performance |
| Timeline |
| Bayerische Motoren Werke |
| Isuzu Motors |
Bayerische Motoren and Isuzu Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayerische Motoren and Isuzu Motors
The main advantage of trading using opposite Bayerische Motoren and Isuzu Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren position performs unexpectedly, Isuzu Motors 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 Isuzu Motors will offset losses from the drop in Isuzu Motors' long position.| Bayerische Motoren vs. Bayerische Motoren Werke | Bayerische Motoren vs. Honda Motor Co | Bayerische Motoren vs. Volkswagen AG VZO | Bayerische Motoren vs. Volkswagen AG |
| Isuzu Motors vs. Suzuki Motor Corp | Isuzu Motors vs. Mitsubishi Estate Co | Isuzu Motors vs. Daiwa House Industry | Isuzu Motors vs. Mitsubishi Electric Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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