Correlation Between Nippon Light and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Nippon Light and Mercedes Benz 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 Nippon Light and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Light Metal and Mercedes Benz Group AG, you can compare the effects of market volatilities on Nippon Light and Mercedes Benz 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 Nippon Light with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Light and Mercedes Benz.
Diversification Opportunities for Nippon Light and Mercedes Benz
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nippon and Mercedes is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group and Nippon Light 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 Nippon Light Metal are associated (or correlated) with Mercedes Benz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of Nippon Light i.e., Nippon Light and Mercedes Benz go up and down completely randomly.
Pair Corralation between Nippon Light and Mercedes Benz
Assuming the 90 days horizon Nippon Light Metal is expected to under-perform the Mercedes Benz. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Light Metal is 1.01 times less risky than Mercedes Benz. The stock trades about 0.0 of its potential returns per unit of risk. The Mercedes Benz Group AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,211 in Mercedes Benz Group AG on October 28, 2024 and sell it today you would earn a total of 469.00 from holding Mercedes Benz Group AG or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Light Metal vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Nippon Light Metal |
| Mercedes Benz Group |
Nippon Light and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Light and Mercedes Benz
The main advantage of trading using opposite Nippon Light and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Light position performs unexpectedly, Mercedes Benz 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 Mercedes Benz will offset losses from the drop in Mercedes Benz's long position.| Nippon Light vs. Prosiebensat 1 Media | Nippon Light vs. PARKEN Sport Entertainment | Nippon Light vs. FLOW TRADERS LTD | Nippon Light vs. Fast Retailing Co |
| Mercedes Benz vs. Performance Food Group | Mercedes Benz vs. DXC Technology Co | Mercedes Benz vs. X FAB Silicon Foundries | Mercedes Benz vs. CAL MAINE FOODS |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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