Correlation Between MERCEDES-BENZ GRP and VOLKSWAGEN
Can any of the company-specific risk be diversified away by investing in both MERCEDES-BENZ GRP and VOLKSWAGEN 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 VOLKSWAGEN 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 VOLKSWAGEN AG VZ, you can compare the effects of market volatilities on MERCEDES-BENZ GRP and VOLKSWAGEN 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 VOLKSWAGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCEDES-BENZ GRP and VOLKSWAGEN.
Diversification Opportunities for MERCEDES-BENZ GRP and VOLKSWAGEN
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MERCEDES-BENZ and VOLKSWAGEN is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding MERCEDES BENZ GRP ADR14 and VOLKSWAGEN AG VZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLKSWAGEN AG VZ 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 VOLKSWAGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLKSWAGEN AG VZ has no effect on the direction of MERCEDES-BENZ GRP i.e., MERCEDES-BENZ GRP and VOLKSWAGEN go up and down completely randomly.
Pair Corralation between MERCEDES-BENZ GRP and VOLKSWAGEN
Assuming the 90 days trading horizon MERCEDES BENZ GRP ADR14 is expected to generate 1.3 times more return on investment than VOLKSWAGEN. However, MERCEDES-BENZ GRP is 1.3 times more volatile than VOLKSWAGEN AG VZ. It trades about -0.17 of its potential returns per unit of risk. VOLKSWAGEN AG VZ is currently generating about -0.32 per unit of risk. If you would invest 1,400 in MERCEDES BENZ GRP ADR14 on August 28, 2024 and sell it today you would lose (110.00) from holding MERCEDES BENZ GRP ADR14 or give up 7.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MERCEDES BENZ GRP ADR14 vs. VOLKSWAGEN AG VZ
Performance |
| Timeline |
| MERCEDES BENZ GRP |
| VOLKSWAGEN AG VZ |
MERCEDES-BENZ GRP and VOLKSWAGEN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MERCEDES-BENZ GRP and VOLKSWAGEN
The main advantage of trading using opposite MERCEDES-BENZ GRP and VOLKSWAGEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCEDES-BENZ GRP position performs unexpectedly, VOLKSWAGEN 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 VOLKSWAGEN will offset losses from the drop in VOLKSWAGEN's long position.| MERCEDES-BENZ GRP vs. Superior Plus Corp | MERCEDES-BENZ GRP vs. NMI Holdings | MERCEDES-BENZ GRP vs. Origin Agritech | MERCEDES-BENZ GRP vs. SIVERS SEMICONDUCTORS AB |
| VOLKSWAGEN vs. Superior Plus Corp | VOLKSWAGEN vs. NMI Holdings | VOLKSWAGEN vs. Origin Agritech | VOLKSWAGEN vs. SIVERS SEMICONDUCTORS AB |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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