Correlation Between Volkswagen and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG VZO and Mercedes Benz Group AG, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Mercedes Benz.
Diversification Opportunities for Volkswagen and Mercedes Benz
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volkswagen and Mercedes is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO 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 Volkswagen 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 Volkswagen AG VZO 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 Volkswagen i.e., Volkswagen and Mercedes Benz go up and down completely randomly.
Pair Corralation between Volkswagen and Mercedes Benz
Assuming the 90 days horizon Volkswagen AG VZO is expected to generate 1.74 times more return on investment than Mercedes Benz. However, Volkswagen is 1.74 times more volatile than Mercedes Benz Group AG. It trades about 0.01 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 10,377 in Volkswagen AG VZO on November 2, 2024 and sell it today you would lose (522.00) from holding Volkswagen AG VZO or give up 5.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Volkswagen AG VZO vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Volkswagen AG VZO |
| Mercedes Benz Group |
Volkswagen and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and Mercedes Benz
The main advantage of trading using opposite Volkswagen and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. Volkswagen AG Pref | Volkswagen vs. Mercedes Benz Group AG | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Honda Motor Co |
| Mercedes Benz vs. Porsche Automobile Holding | Mercedes Benz vs. Volkswagen AG 110 | Mercedes Benz vs. Mercedes Benz Group AG | Mercedes Benz vs. Volkswagen AG Pref |
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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