Correlation Between Suzuki and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Suzuki and Bayerische Motoren 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 Suzuki and Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suzuki Motor Corp and Bayerische Motoren Werke, you can compare the effects of market volatilities on Suzuki and Bayerische Motoren 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 Suzuki with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzuki and Bayerische Motoren.
Diversification Opportunities for Suzuki and Bayerische Motoren
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Suzuki and Bayerische is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Suzuki Motor Corp and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and Suzuki 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 Suzuki Motor Corp are associated (or correlated) with Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Suzuki i.e., Suzuki and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Suzuki and Bayerische Motoren
Assuming the 90 days horizon Suzuki Motor Corp is expected to generate 1.05 times more return on investment than Bayerische Motoren. However, Suzuki is 1.05 times more volatile than Bayerische Motoren Werke. It trades about 0.14 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.29 per unit of risk. If you would invest 3,995 in Suzuki Motor Corp on August 29, 2024 and sell it today you would earn a total of 257.00 from holding Suzuki Motor Corp or generate 6.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suzuki Motor Corp vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Suzuki Motor Corp |
| Bayerische Motoren Werke |
Suzuki and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suzuki and Bayerische Motoren
The main advantage of trading using opposite Suzuki and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suzuki position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Suzuki vs. Isuzu Motors | Suzuki vs. Honda Motor Co | Suzuki vs. Porsche Automobil Holding | Suzuki vs. Mazda Motor Corp |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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