Correlation Between Mercedes Benz and Dongfeng
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Dongfeng 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 Dongfeng 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 Dongfeng Group, you can compare the effects of market volatilities on Mercedes Benz and Dongfeng 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 Dongfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Dongfeng.
Diversification Opportunities for Mercedes Benz and Dongfeng
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mercedes and Dongfeng is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Dongfeng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Group 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 Dongfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Group has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Dongfeng go up and down completely randomly.
Pair Corralation between Mercedes Benz and Dongfeng
Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Dongfeng. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 3.3 times less risky than Dongfeng. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Dongfeng Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 51.00 in Dongfeng Group on August 28, 2024 and sell it today you would lose (1.00) from holding Dongfeng Group or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Dongfeng Group
Performance |
| Timeline |
| Mercedes Benz Group |
| Dongfeng Group |
Mercedes Benz and Dongfeng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Dongfeng
The main advantage of trading using opposite Mercedes Benz and Dongfeng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Dongfeng 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 Dongfeng will offset losses from the drop in Dongfeng'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 |
| Dongfeng vs. Isuzu Motors | Dongfeng vs. Renault SA | Dongfeng vs. Toyota Motor Corp | Dongfeng vs. Porsche Automobile Holding |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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