Correlation Between Safety Insurance and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Safety Insurance 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 Safety Insurance and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and Mercedes Benz Group AG, you can compare the effects of market volatilities on Safety Insurance 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 Safety Insurance with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Mercedes Benz.
Diversification Opportunities for Safety Insurance and Mercedes Benz
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Safety and Mercedes is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group 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 Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and Mercedes Benz go up and down completely randomly.
Pair Corralation between Safety Insurance and Mercedes Benz
Assuming the 90 days horizon Safety Insurance Group is expected to generate 1.16 times more return on investment than Mercedes Benz. However, Safety Insurance is 1.16 times more volatile than Mercedes Benz Group AG. It trades about 0.05 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.01 per unit of risk. If you would invest 6,724 in Safety Insurance Group on September 14, 2024 and sell it today you would earn a total of 1,126 from holding Safety Insurance Group or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safety Insurance Group vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Safety Insurance |
| Mercedes Benz Group |
Safety Insurance and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and Mercedes Benz
The main advantage of trading using opposite Safety Insurance and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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.| Safety Insurance vs. Insurance Australia Group | Safety Insurance vs. Superior Plus Corp | Safety Insurance vs. SIVERS SEMICONDUCTORS AB | Safety Insurance vs. CHINA HUARONG ENERHD 50 |
| Mercedes Benz vs. Seven West Media | Mercedes Benz vs. PARKEN Sport Entertainment | Mercedes Benz vs. EIDESVIK OFFSHORE NK | Mercedes Benz vs. GEAR4MUSIC LS 10 |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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