Correlation Between Mercedes Benz and Vertex Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Vertex 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 and Vertex 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 Vertex Pharmaceuticals Incorporated, you can compare the effects of market volatilities on Mercedes Benz and Vertex 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 with a short position of Vertex Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Vertex Pharmaceuticals.
Diversification Opportunities for Mercedes Benz and Vertex Pharmaceuticals
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mercedes and Vertex is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Vertex Pharmaceuticals Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Vertex Pharmaceuticals go up and down completely randomly.
Pair Corralation between Mercedes Benz and Vertex Pharmaceuticals
Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 0.44 times more return on investment than Vertex Pharmaceuticals. However, Mercedes Benz Group AG is 2.26 times less risky than Vertex Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Vertex Pharmaceuticals Incorporated is currently generating about -0.18 per unit of risk. If you would invest 5,245 in Mercedes Benz Group AG on September 23, 2024 and sell it today you would earn a total of 112.00 from holding Mercedes Benz Group AG or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Vertex Pharmaceuticals Incorpo
Performance |
| Timeline |
| Mercedes Benz Group |
| Vertex Pharmaceuticals |
Mercedes Benz and Vertex Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Vertex Pharmaceuticals
The main advantage of trading using opposite Mercedes Benz and Vertex Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Vertex 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 Vertex Pharmaceuticals will offset losses from the drop in Vertex Pharmaceuticals' 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 |
| Vertex Pharmaceuticals vs. Novo Nordisk AS | Vertex Pharmaceuticals vs. CSL LTD SPONADR | Vertex Pharmaceuticals vs. CSL Limited | Vertex Pharmaceuticals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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