Correlation Between Ferrari NV and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Ferrari NV 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 Ferrari NV and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and Mercedes Benz Group AG, you can compare the effects of market volatilities on Ferrari NV 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 Ferrari NV with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Mercedes Benz.
Diversification Opportunities for Ferrari NV and Mercedes Benz
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ferrari and Mercedes is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari 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 Ferrari NV 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 Ferrari 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 Ferrari NV i.e., Ferrari NV and Mercedes Benz go up and down completely randomly.
Pair Corralation between Ferrari NV and Mercedes Benz
Given the investment horizon of 90 days Ferrari NV is expected to under-perform the Mercedes Benz. But the stock apears to be less risky and, when comparing its historical volatility, Ferrari NV is 1.14 times less risky than Mercedes Benz. The stock trades about -0.27 of its potential returns per unit of risk. The Mercedes Benz Group AG is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest 6,208 in Mercedes Benz Group AG on August 28, 2024 and sell it today you would lose (658.00) from holding Mercedes Benz Group AG or give up 10.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Ferrari NV |
| Mercedes Benz Group |
Ferrari NV and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and Mercedes Benz
The main advantage of trading using opposite Ferrari NV and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV 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.| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Bayerische Motoren Werke |
| Mercedes Benz vs. Bayerische Motoren Werke | Mercedes Benz vs. Volkswagen AG Pref | Mercedes Benz vs. Porsche Automobile Holding | Mercedes Benz vs. Volkswagen AG |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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