Correlation Between Retail Estates and Mercedes Benz
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.65% |
Values | Daily Returns |
Retail Estates NV vs. Mercedes Benz Group AG
Performance |
Timeline |
Retail Estates NV |
Mercedes Benz Group |
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.Retail Estates vs. Take Two Interactive Software | Retail Estates vs. Insurance Australia Group | Retail Estates vs. REVO INSURANCE SPA | Retail Estates vs. ALBIS LEASING AG |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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