Correlation Between Mercedes Benz and Porsche Automobil
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Porsche Automobil 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 Porsche Automobil 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 Porsche Automobil Holding, you can compare the effects of market volatilities on Mercedes Benz and Porsche Automobil 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 Porsche Automobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Porsche Automobil.
Diversification Opportunities for Mercedes Benz and Porsche Automobil
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mercedes and Porsche is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil Holding 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 Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Porsche Automobil go up and down completely randomly.
Pair Corralation between Mercedes Benz and Porsche Automobil
Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 0.88 times more return on investment than Porsche Automobil. However, Mercedes Benz Group AG is 1.14 times less risky than Porsche Automobil. It trades about -0.27 of its potential returns per unit of risk. Porsche Automobil Holding is currently generating about -0.31 per unit of risk. If you would invest 6,310 in Mercedes Benz Group AG on August 25, 2024 and sell it today you would lose (807.00) from holding Mercedes Benz Group AG or give up 12.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Porsche Automobil Holding
Performance |
| Timeline |
| Mercedes Benz Group |
| Porsche Automobil Holding |
Mercedes Benz and Porsche Automobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Porsche Automobil
The main advantage of trading using opposite Mercedes Benz and Porsche Automobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Porsche Automobil 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 Porsche Automobil will offset losses from the drop in Porsche Automobil'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 |
| Porsche Automobil vs. Volkswagen AG Pref | Porsche Automobil vs. Volkswagen AG 110 | Porsche Automobil vs. Ferrari NV | Porsche Automobil vs. Bayerische Motoren Werke |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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