Correlation Between GEAR4MUSIC (HLDGS) and Bayerische Motoren

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Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC (HLDGS) and Bayerische Motoren 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 GEAR4MUSIC (HLDGS) and Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Bayerische Motoren Werke, you can compare the effects of market volatilities on GEAR4MUSIC (HLDGS) and Bayerische Motoren 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 GEAR4MUSIC (HLDGS) with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC (HLDGS) and Bayerische Motoren.

Diversification Opportunities for GEAR4MUSIC (HLDGS) and Bayerische Motoren

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between GEAR4MUSIC and Bayerische is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10 are associated (or correlated) with Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of GEAR4MUSIC (HLDGS) i.e., GEAR4MUSIC (HLDGS) and Bayerische Motoren go up and down completely randomly.

Pair Corralation between GEAR4MUSIC (HLDGS) and Bayerische Motoren

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to under-perform the Bayerische Motoren. In addition to that, GEAR4MUSIC (HLDGS) is 1.16 times more volatile than Bayerische Motoren Werke. It trades about -0.38 of its total potential returns per unit of risk. Bayerische Motoren Werke is currently generating about 0.09 per unit of volatility. If you would invest  7,130  in Bayerische Motoren Werke on October 21, 2024 and sell it today you would earn a total of  145.00  from holding Bayerische Motoren Werke or generate 2.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GEAR4MUSIC LS 10  vs.  Bayerische Motoren Werke

 Performance 
       Timeline  
GEAR4MUSIC (HLDGS) 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Bayerische Motoren Werke 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bayerische Motoren Werke are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bayerische Motoren is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

GEAR4MUSIC (HLDGS) and Bayerische Motoren Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GEAR4MUSIC (HLDGS) and Bayerische Motoren

The main advantage of trading using opposite GEAR4MUSIC (HLDGS) and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC (HLDGS) position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.
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The idea behind GEAR4MUSIC LS 10 and Bayerische Motoren Werke pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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