Correlation Between Mercedes Benz and Aston Martin
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Aston Martin 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 Aston Martin 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 Aston Martin Lagonda, you can compare the effects of market volatilities on Mercedes Benz and Aston Martin 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 Aston Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Aston Martin.
Diversification Opportunities for Mercedes Benz and Aston Martin
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mercedes and Aston is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Aston Martin Lagonda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Martin Lagonda 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 Aston Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Martin Lagonda has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Aston Martin go up and down completely randomly.
Pair Corralation between Mercedes Benz and Aston Martin
Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Aston Martin. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 1.55 times less risky than Aston Martin. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Aston Martin Lagonda is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 144.00 in Aston Martin Lagonda on September 1, 2024 and sell it today you would lose (13.00) from holding Aston Martin Lagonda or give up 9.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Aston Martin Lagonda
Performance |
| Timeline |
| Mercedes Benz Group |
| Aston Martin Lagonda |
Mercedes Benz and Aston Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Aston Martin
The main advantage of trading using opposite Mercedes Benz and Aston Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Aston Martin 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 Aston Martin will offset losses from the drop in Aston Martin's long position.| Mercedes Benz vs. Bayerische Motoren Werke | Mercedes Benz vs. Porsche Automobile Holding | Mercedes Benz vs. Volkswagen AG 110 | Mercedes Benz vs. Mercedes Benz Group AG |
| Aston Martin vs. Geely Automobile Holdings | Aston Martin vs. Guangzhou Automobile Group | Aston Martin vs. Dowlais Group plc | Aston Martin vs. NFI Group |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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