Correlation Between Bayerische Motoren and Porsche Automobil
Can any of the company-specific risk be diversified away by investing in both Bayerische Motoren and Porsche Automobil 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 Porsche Automobil 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 Porsche Automobil Holding, you can compare the effects of market volatilities on Bayerische Motoren and Porsche Automobil 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 Porsche Automobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Porsche Automobil.
Diversification Opportunities for Bayerische Motoren and Porsche Automobil
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bayerische and Porsche is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil Holding 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 Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Porsche Automobil go up and down completely randomly.
Pair Corralation between Bayerische Motoren and Porsche Automobil
Assuming the 90 days horizon Bayerische Motoren Werke is expected to under-perform the Porsche Automobil. In addition to that, Bayerische Motoren is 1.28 times more volatile than Porsche Automobil Holding. It trades about -0.3 of its total potential returns per unit of risk. Porsche Automobil Holding is currently generating about -0.31 per unit of volatility. If you would invest 4,422 in Porsche Automobil Holding on August 25, 2024 and sell it today you would lose (725.00) from holding Porsche Automobil Holding or give up 16.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayerische Motoren Werke vs. Porsche Automobil Holding
Performance |
| Timeline |
| Bayerische Motoren Werke |
| Porsche Automobil Holding |
Bayerische Motoren and Porsche Automobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayerische Motoren and Porsche Automobil
The main advantage of trading using opposite Bayerische Motoren and Porsche Automobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren position performs unexpectedly, Porsche Automobil 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 Porsche Automobil will offset losses from the drop in Porsche Automobil's 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 |
| Porsche Automobil vs. Isuzu Motors | Porsche Automobil vs. Renault SA | Porsche Automobil vs. Mazda Motor Corp | Porsche Automobil 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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