Correlation Between MERCEDES-BENZ GRP and BYD Company
Can any of the company-specific risk be diversified away by investing in both MERCEDES-BENZ GRP and BYD Company 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 MERCEDES-BENZ GRP and BYD Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MERCEDES BENZ GRP ADR14 and BYD Company Limited, you can compare the effects of market volatilities on MERCEDES-BENZ GRP and BYD Company 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 MERCEDES-BENZ GRP with a short position of BYD Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCEDES-BENZ GRP and BYD Company.
Diversification Opportunities for MERCEDES-BENZ GRP and BYD Company
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MERCEDES-BENZ and BYD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding MERCEDES BENZ GRP ADR14 and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited and MERCEDES-BENZ GRP 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 MERCEDES BENZ GRP ADR14 are associated (or correlated) with BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of MERCEDES-BENZ GRP i.e., MERCEDES-BENZ GRP and BYD Company go up and down completely randomly.
Pair Corralation between MERCEDES-BENZ GRP and BYD Company
Assuming the 90 days trading horizon MERCEDES BENZ GRP ADR14 is expected to under-perform the BYD Company. But the stock apears to be less risky and, when comparing its historical volatility, MERCEDES BENZ GRP ADR14 is 1.11 times less risky than BYD Company. The stock trades about -0.18 of its potential returns per unit of risk. The BYD Company Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 6,600 in BYD Company Limited on September 1, 2024 and sell it today you would lose (250.00) from holding BYD Company Limited or give up 3.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
MERCEDES BENZ GRP ADR14 vs. BYD Company Limited
Performance |
| Timeline |
| MERCEDES BENZ GRP |
| BYD Limited |
MERCEDES-BENZ GRP and BYD Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MERCEDES-BENZ GRP and BYD Company
The main advantage of trading using opposite MERCEDES-BENZ GRP and BYD Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCEDES-BENZ GRP position performs unexpectedly, BYD Company 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 BYD Company will offset losses from the drop in BYD Company's long position.| MERCEDES-BENZ GRP vs. Strategic Investments AS | MERCEDES-BENZ GRP vs. CapitaLand Investment Limited | MERCEDES-BENZ GRP vs. Gladstone Investment | MERCEDES-BENZ GRP vs. PennyMac Mortgage Investment |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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