Correlation Between Mercedes Benz and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Volkswagen 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 Volkswagen 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 Volkswagen AG Pref, you can compare the effects of market volatilities on Mercedes Benz and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Volkswagen.
Diversification Opportunities for Mercedes Benz and Volkswagen
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mercedes and Volkswagen is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Volkswagen AG Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Pref 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG Pref has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Volkswagen go up and down completely randomly.
Pair Corralation between Mercedes Benz and Volkswagen
Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 0.99 times more return on investment than Volkswagen. However, Mercedes Benz Group AG is 1.01 times less risky than Volkswagen. It trades about -0.04 of its potential returns per unit of risk. Volkswagen AG Pref is currently generating about -0.05 per unit of risk. If you would invest 1,831 in Mercedes Benz Group AG on August 29, 2024 and sell it today you would lose (455.00) from holding Mercedes Benz Group AG or give up 24.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Volkswagen AG Pref
Performance |
| Timeline |
| Mercedes Benz Group |
| Volkswagen AG Pref |
Mercedes Benz and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes Benz and Volkswagen
The main advantage of trading using opposite Mercedes Benz and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen'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 |
| Volkswagen vs. Volkswagen AG 110 | Volkswagen vs. Porsche Automobil Holding | Volkswagen vs. Ferrari NV | Volkswagen 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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