Correlation Between Great Wall and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Great Wall and Mercedes Benz 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 Great Wall and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Motor and Mercedes Benz Group AG, you can compare the effects of market volatilities on Great Wall and Mercedes Benz 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 Great Wall with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Mercedes Benz.
Diversification Opportunities for Great Wall and Mercedes Benz
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Great and Mercedes is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group and Great Wall 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 Great Wall Motor are associated (or correlated) with Mercedes Benz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of Great Wall i.e., Great Wall and Mercedes Benz go up and down completely randomly.
Pair Corralation between Great Wall and Mercedes Benz
Assuming the 90 days horizon Great Wall Motor is expected to generate 1.67 times more return on investment than Mercedes Benz. However, Great Wall is 1.67 times more volatile than Mercedes Benz Group AG. It trades about -0.04 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.23 per unit of risk. If you would invest 175.00 in Great Wall Motor on August 28, 2024 and sell it today you would lose (8.00) from holding Great Wall Motor or give up 4.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Motor vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Great Wall Motor |
| Mercedes Benz Group |
Great Wall and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Mercedes Benz
The main advantage of trading using opposite Great Wall and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Mercedes Benz 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 Mercedes Benz will offset losses from the drop in Mercedes Benz's long position.| Great Wall vs. Mitsubishi Motors Corp | Great Wall vs. Geely Automobile Holdings | Great Wall vs. Hyundai Motor Co | Great Wall vs. Volkswagen AG 110 |
| Mercedes Benz vs. Bayerische Motoren Werke | Mercedes Benz vs. Porsche Automobile Holding | Mercedes Benz vs. Volkswagen AG 110 | Mercedes Benz vs. Mercedes Benz Group AG |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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