Correlation Between Mercedes Benz and WUXI BIOLOGICS
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and WUXI BIOLOGICS 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 and WUXI BIOLOGICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercedes Benz Group AG and WUXI BIOLOGICS UNSPADR2, you can compare the effects of market volatilities on Mercedes Benz and WUXI BIOLOGICS 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 with a short position of WUXI BIOLOGICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and WUXI BIOLOGICS.
Diversification Opportunities for Mercedes Benz and WUXI BIOLOGICS
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mercedes and WUXI is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and WUXI BIOLOGICS UNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WUXI BIOLOGICS UNSPADR2 and Mercedes Benz 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 Group AG are associated (or correlated) with WUXI BIOLOGICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WUXI BIOLOGICS UNSPADR2 has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and WUXI BIOLOGICS go up and down completely randomly.
Pair Corralation between Mercedes Benz and WUXI BIOLOGICS
Assuming the 90 days horizon Mercedes Benz is expected to generate 10.03 times less return on investment than WUXI BIOLOGICS. But when comparing it to its historical volatility, Mercedes Benz Group AG is 3.07 times less risky than WUXI BIOLOGICS. It trades about 0.08 of its potential returns per unit of risk. WUXI BIOLOGICS UNSPADR2 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 338.00 in WUXI BIOLOGICS UNSPADR2 on September 23, 2024 and sell it today you would earn a total of 80.00 from holding WUXI BIOLOGICS UNSPADR2 or generate 23.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. WUXI BIOLOGICS UNSPADR2
Performance |
| Timeline |
| Mercedes Benz Group |
| WUXI BIOLOGICS UNSPADR2 |
Mercedes Benz and WUXI BIOLOGICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and WUXI BIOLOGICS
The main advantage of trading using opposite Mercedes Benz and WUXI BIOLOGICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, WUXI BIOLOGICS 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 WUXI BIOLOGICS will offset losses from the drop in WUXI BIOLOGICS's long position.| Mercedes Benz vs. Novo Nordisk AS | Mercedes Benz vs. CSL LTD SPONADR | Mercedes Benz vs. CSL Limited | Mercedes Benz vs. Vertex Pharmaceuticals Incorporated |
| WUXI BIOLOGICS vs. COFCO Joycome Foods | WUXI BIOLOGICS vs. LIFEWAY FOODS | WUXI BIOLOGICS vs. INTER CARS SA | WUXI BIOLOGICS vs. Cal Maine Foods |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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