Correlation Between Honda and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Honda 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 Honda and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honda Motor Co and Mercedes Benz Group AG, you can compare the effects of market volatilities on Honda 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 Honda with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Mercedes Benz.
Diversification Opportunities for Honda and Mercedes Benz
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Honda and Mercedes is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co 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 Honda 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 Honda Motor Co 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 Honda i.e., Honda and Mercedes Benz go up and down completely randomly.
Pair Corralation between Honda and Mercedes Benz
Assuming the 90 days horizon Honda Motor Co is expected to generate 24.16 times more return on investment than Mercedes Benz. However, Honda is 24.16 times more volatile than Mercedes Benz Group AG. It trades about 0.1 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.04 per unit of risk. If you would invest 790.00 in Honda Motor Co on August 29, 2024 and sell it today you would earn a total of 90.00 from holding Honda Motor Co or generate 11.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.73% |
| Values | Daily Returns |
Honda Motor Co vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Honda Motor |
| Mercedes Benz Group |
Honda and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Mercedes Benz
The main advantage of trading using opposite Honda and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda 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.| Honda vs. Bayerische Motoren Werke | Honda vs. Volkswagen AG VZO | Honda vs. Volkswagen AG | Honda vs. Bayerische Motoren Werke |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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