Correlation Between Retail Estates and Mercedes Benz

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Can any of the company-specific risk be diversified away by investing in both Retail Estates 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 Retail Estates and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Estates NV and Mercedes Benz Group AG, you can compare the effects of market volatilities on Retail Estates 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 Retail Estates with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and Mercedes Benz.

Diversification Opportunities for Retail Estates and Mercedes Benz

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Retail and Mercedes is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV 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 Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Mercedes Benz go up and down completely randomly.

Pair Corralation between Retail Estates and Mercedes Benz

Assuming the 90 days horizon Retail Estates NV is expected to under-perform the Mercedes Benz. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 1.57 times less risky than Mercedes Benz. The stock trades about -0.02 of its potential returns per unit of risk. The Mercedes Benz Group AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,270  in Mercedes Benz Group AG on September 7, 2024 and sell it today you would earn a total of  53.00  from holding Mercedes Benz Group AG or generate 1.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Retail Estates NV  vs.  Mercedes Benz Group AG

 Performance 
       Timeline  
Retail Estates NV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Mercedes Benz Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mercedes Benz Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Retail Estates and Mercedes Benz Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Retail Estates and Mercedes Benz

The main advantage of trading using opposite Retail Estates and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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.
The idea behind Retail Estates NV and Mercedes Benz Group AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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