Correlation Between Vertex Pharmaceuticals and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both Vertex Pharmaceuticals 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 Vertex Pharmaceuticals and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vertex Pharmaceuticals Incorporated and Mercedes Benz Group AG, you can compare the effects of market volatilities on Vertex Pharmaceuticals 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 Vertex Pharmaceuticals with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertex Pharmaceuticals and Mercedes Benz.
Diversification Opportunities for Vertex Pharmaceuticals and Mercedes Benz
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vertex and Mercedes is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Pharmaceuticals Incorpo 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 Vertex Pharmaceuticals 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 Vertex Pharmaceuticals Incorporated 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 Vertex Pharmaceuticals i.e., Vertex Pharmaceuticals and Mercedes Benz go up and down completely randomly.
Pair Corralation between Vertex Pharmaceuticals and Mercedes Benz
Assuming the 90 days horizon Vertex Pharmaceuticals Incorporated is expected to under-perform the Mercedes Benz. In addition to that, Vertex Pharmaceuticals is 2.26 times more volatile than Mercedes Benz Group AG. It trades about -0.18 of its total potential returns per unit of risk. Mercedes Benz Group AG is currently generating about 0.08 per unit of volatility. If you would invest 5,245 in Mercedes Benz Group AG on September 23, 2024 and sell it today you would earn a total of 112.00 from holding Mercedes Benz Group AG or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vertex Pharmaceuticals Incorpo vs. Mercedes Benz Group AG
Performance |
| Timeline |
| Vertex Pharmaceuticals |
| Mercedes Benz Group |
Vertex Pharmaceuticals and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vertex Pharmaceuticals and Mercedes Benz
The main advantage of trading using opposite Vertex Pharmaceuticals and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertex Pharmaceuticals 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.| Vertex Pharmaceuticals vs. Novo Nordisk AS | Vertex Pharmaceuticals vs. CSL LTD SPONADR | Vertex Pharmaceuticals vs. CSL Limited | Vertex Pharmaceuticals vs. Mercedes Benz Group AG |
| Mercedes Benz vs. Novo Nordisk AS | Mercedes Benz vs. CSL LTD SPONADR | Mercedes Benz vs. CSL Limited | Mercedes Benz vs. Vertex Pharmaceuticals Incorporated |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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