Correlation Between Mercedes-Benz Group and Jazz Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Mercedes-Benz Group and Jazz Pharmaceuticals 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 Group and Jazz Pharmaceuticals 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 Jazz Pharmaceuticals plc, you can compare the effects of market volatilities on Mercedes-Benz Group and Jazz Pharmaceuticals 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 Group with a short position of Jazz Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes-Benz Group and Jazz Pharmaceuticals.
Diversification Opportunities for Mercedes-Benz Group and Jazz Pharmaceuticals
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mercedes-Benz and Jazz is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Jazz Pharmaceuticals plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals plc and Mercedes-Benz Group 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 Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals plc has no effect on the direction of Mercedes-Benz Group i.e., Mercedes-Benz Group and Jazz Pharmaceuticals go up and down completely randomly.
Pair Corralation between Mercedes-Benz Group and Jazz Pharmaceuticals
Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Jazz Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 1.39 times less risky than Jazz Pharmaceuticals. The stock trades about -0.05 of its potential returns per unit of risk. The Jazz Pharmaceuticals plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,150 in Jazz Pharmaceuticals plc on October 14, 2024 and sell it today you would earn a total of 1,655 from holding Jazz Pharmaceuticals plc or generate 16.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Jazz Pharmaceuticals plc
Performance |
| Timeline |
| Mercedes Benz Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Jazz Pharmaceuticals plc |
Mercedes-Benz Group and Jazz Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes-Benz Group and Jazz Pharmaceuticals
The main advantage of trading using opposite Mercedes-Benz Group and Jazz Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes-Benz Group position performs unexpectedly, Jazz Pharmaceuticals 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 Jazz Pharmaceuticals will offset losses from the drop in Jazz Pharmaceuticals' long position.| Mercedes-Benz Group vs. Solstad Offshore ASA | Mercedes-Benz Group vs. EIDESVIK OFFSHORE NK | Mercedes-Benz Group vs. Nippon Light Metal | Mercedes-Benz Group vs. PT Wintermar Offshore |
| Jazz Pharmaceuticals vs. T MOBILE INCDL 00001 | Jazz Pharmaceuticals vs. Shenandoah Telecommunications | Jazz Pharmaceuticals vs. TELECOM ITALIA | Jazz Pharmaceuticals vs. Charter Communications |
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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