Correlation Between Mercedes Benz and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz 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 Mercedes Benz and Bayerische Motoren 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 Bayerische Motoren Werke, you can compare the effects of market volatilities on Mercedes Benz 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 Mercedes Benz with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Bayerische Motoren.
Diversification Opportunities for Mercedes Benz and Bayerische Motoren
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mercedes and Bayerische is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG 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 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 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 Mercedes Benz i.e., Mercedes Benz and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Mercedes Benz and Bayerische Motoren
Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 0.9 times more return on investment than Bayerische Motoren. However, Mercedes Benz Group AG is 1.11 times less risky than Bayerische Motoren. It trades about -0.05 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.07 per unit of risk. If you would invest 7,373 in Mercedes Benz Group AG on August 28, 2024 and sell it today you would lose (1,823) from holding Mercedes Benz Group AG or give up 24.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.72% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Mercedes Benz Group |
| Bayerische Motoren Werke |
Mercedes Benz and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Bayerische Motoren
The main advantage of trading using opposite Mercedes Benz and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz 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.| Mercedes Benz vs. Bayerische Motoren Werke | Mercedes Benz vs. Volkswagen AG Pref | Mercedes Benz vs. Porsche Automobile Holding | Mercedes Benz vs. Volkswagen AG |
| Bayerische Motoren vs. Mercedes Benz Group AG | Bayerische Motoren vs. Porsche Automobile Holding | Bayerische Motoren vs. Volkswagen AG 110 | Bayerische Motoren 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 CEOs Directory module to screen CEOs from public companies around the world.
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