Correlation Between Xenia Hotels and Mercedes Benz

Can any of the company-specific risk be diversified away by investing in both Xenia Hotels 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 Xenia Hotels and Mercedes Benz into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xenia Hotels Resorts and Mercedes Benz Group AG, you can compare the effects of market volatilities on Xenia Hotels 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 Xenia Hotels with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xenia Hotels and Mercedes Benz.

Diversification Opportunities for Xenia Hotels and Mercedes Benz

-0.68

Correlation Coefficient

Xenia Hotels  Mercedes Benz

Excellent diversification

The 3 months correlation between Xenia and Mercedes is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts 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 Xenia Hotels 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 Xenia Hotels Resorts 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 Xenia Hotels i.e., Xenia Hotels and Mercedes Benz go up and down completely randomly.

Pair Corralation between Xenia Hotels and Mercedes Benz

Assuming the 90 days trading horizon Xenia Hotels Resorts is expected to under-perform the Mercedes Benz. In addition to that, Xenia Hotels is 1.22 times more volatile than Mercedes Benz Group AG. It trades about -0.2 of its total potential returns per unit of risk. Mercedes Benz Group AG is currently generating about 0.12 per unit of volatility. If you would invest  5,285  in Mercedes Benz Group AG on December 23, 2024 and sell it today you would earn a total of  568.00  from holding Mercedes Benz Group AG or generate 10.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Xenia Hotels Resorts  vs.  Mercedes Benz Group AG

Xenia Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xenia Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mercedes Benz Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mercedes Benz Group AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mercedes Benz may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Xenia Hotels and Mercedes Benz

The main advantage of trading using opposite Xenia Hotels and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xenia Hotels 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.

The idea behind Xenia Hotels Resorts and Mercedes Benz Group AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.