Correlation Between Mercedes Benz and Dr Ing
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Dr Ing 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 Dr Ing 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 Dr Ing hc, you can compare the effects of market volatilities on Mercedes Benz and Dr Ing 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 Dr Ing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Dr Ing.
Diversification Opportunities for Mercedes Benz and Dr Ing
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mercedes and DRPRF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Dr Ing hc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Ing hc 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 Dr Ing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Ing hc has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Dr Ing go up and down completely randomly.
Pair Corralation between Mercedes Benz and Dr Ing
Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Dr Ing. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 1.68 times less risky than Dr Ing. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Dr Ing hc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 7,755 in Dr Ing hc on August 25, 2024 and sell it today you would lose (1,662) from holding Dr Ing hc or give up 21.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Dr Ing hc
Performance |
| Timeline |
| Mercedes Benz Group |
| Dr Ing hc |
Mercedes Benz and Dr Ing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Dr Ing
The main advantage of trading using opposite Mercedes Benz and Dr Ing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Dr Ing 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 Dr Ing will offset losses from the drop in Dr Ing'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 |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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