Correlation Between Renault SA and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Renault SA 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 Renault SA and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renault SA and Mercedes Benz Group AG, you can compare the effects of market volatilities on Renault SA 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 Renault SA with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renault SA and Mercedes Benz.
Diversification Opportunities for Renault SA and Mercedes Benz
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Renault and Mercedes is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA 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 Renault SA 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 Renault SA 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 Renault SA i.e., Renault SA and Mercedes Benz go up and down completely randomly.
Pair Corralation between Renault SA and Mercedes Benz
Assuming the 90 days horizon Renault SA is expected to generate 0.64 times more return on investment than Mercedes Benz. However, Renault SA is 1.55 times less risky than Mercedes Benz. It trades about -0.18 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.27 per unit of risk. If you would invest 907.00 in Renault SA on August 25, 2024 and sell it today you would lose (52.00) from holding Renault SA or give up 5.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Renault SA vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Renault SA |
| Mercedes Benz Group |
Renault SA and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Renault SA and Mercedes Benz
The main advantage of trading using opposite Renault SA and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renault SA 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.| Renault SA vs. Mazda Motor | Renault SA vs. Subaru Corp ADR | Renault SA vs. Bayerische Motoren Werke | Renault SA vs. Isuzu Motors |
| 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 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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