Correlation Between Mercedes Benz and Great Wall
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Great Wall 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 Great Wall 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 Great Wall Motor, you can compare the effects of market volatilities on Mercedes Benz and Great Wall 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 Great Wall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Great Wall.
Diversification Opportunities for Mercedes Benz and Great Wall
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mercedes and Great is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor 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 Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Great Wall go up and down completely randomly.
Pair Corralation between Mercedes Benz and Great Wall
Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Great Wall. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 1.71 times less risky than Great Wall. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Great Wall Motor is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 186.00 in Great Wall Motor on August 24, 2024 and sell it today you would lose (19.00) from holding Great Wall Motor or give up 10.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Great Wall Motor
Performance |
| Timeline |
| Mercedes Benz Group |
| Great Wall Motor |
Mercedes Benz and Great Wall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Great Wall
The main advantage of trading using opposite Mercedes Benz and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Great Wall 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 Great Wall will offset losses from the drop in Great Wall'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 |
| Great Wall vs. Mitsubishi Motors Corp | Great Wall vs. Geely Automobile Holdings | Great Wall vs. Hyundai Motor Co | Great Wall vs. Volkswagen AG 110 |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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