Correlation Between Mercedes Benz and BAIC MotorLimited
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and BAIC MotorLimited 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 BAIC MotorLimited 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 BAIC Motor, you can compare the effects of market volatilities on Mercedes Benz and BAIC MotorLimited 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 BAIC MotorLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and BAIC MotorLimited.
Diversification Opportunities for Mercedes Benz and BAIC MotorLimited
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mercedes and BAIC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and BAIC Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIC MotorLimited 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 BAIC MotorLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIC MotorLimited has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and BAIC MotorLimited go up and down completely randomly.
Pair Corralation between Mercedes Benz and BAIC MotorLimited
Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the BAIC MotorLimited. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 1.2 times less risky than BAIC MotorLimited. The pink sheet trades about -0.18 of its potential returns per unit of risk. The BAIC Motor is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 27.00 in BAIC Motor on September 1, 2024 and sell it today you would earn a total of 3.00 from holding BAIC Motor or generate 11.11% 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. BAIC Motor
Performance |
| Timeline |
| Mercedes Benz Group |
| BAIC MotorLimited |
Mercedes Benz and BAIC MotorLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and BAIC MotorLimited
The main advantage of trading using opposite Mercedes Benz and BAIC MotorLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, BAIC MotorLimited 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 BAIC MotorLimited will offset losses from the drop in BAIC MotorLimited'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 |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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