Correlation Between Isuzu Motors and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Isuzu Motors 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 Isuzu Motors and Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Isuzu Motors and Bayerische Motoren Werke, you can compare the effects of market volatilities on Isuzu Motors 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 Isuzu Motors with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Isuzu Motors and Bayerische Motoren.
Diversification Opportunities for Isuzu Motors and Bayerische Motoren
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Isuzu and Bayerische is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors i.e., Isuzu Motors and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Isuzu Motors and Bayerische Motoren
Assuming the 90 days horizon Isuzu Motors is expected to generate 0.81 times more return on investment than Bayerische Motoren. However, Isuzu Motors is 1.23 times less risky than Bayerische Motoren. It trades about -0.1 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.18 per unit of risk. If you would invest 1,499 in Isuzu Motors on August 28, 2024 and sell it today you would lose (159.00) from holding Isuzu Motors or give up 10.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Isuzu Motors vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Isuzu Motors |
| Bayerische Motoren Werke |
Isuzu Motors and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Isuzu Motors and Bayerische Motoren
The main advantage of trading using opposite Isuzu Motors and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Isuzu Motors 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.| Isuzu Motors vs. Suzuki Motor Corp | Isuzu Motors vs. Mitsubishi Estate Co | Isuzu Motors vs. Daiwa House Industry | Isuzu Motors vs. Mitsubishi Electric Corp |
| Bayerische Motoren vs. Bayerische Motoren Werke | Bayerische Motoren vs. Honda Motor Co | Bayerische Motoren vs. Volkswagen AG VZO | Bayerische Motoren vs. Volkswagen 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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