Correlation Between Aston Martin and Mercedes-Benz Group

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

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

Diversification Opportunities for Aston Martin and Mercedes-Benz Group

-0.49

Correlation Coefficient

Aston Martin  Mercedes-Benz Group

Very good diversification

The 3 months correlation between Aston and Mercedes-Benz is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda 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 Aston Martin 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 Aston Martin Lagonda are associated (or correlated) with Mercedes-Benz Group. 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 Aston Martin i.e., Aston Martin and Mercedes-Benz Group go up and down completely randomly.

Pair Corralation between Aston Martin and Mercedes-Benz Group

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the Mercedes-Benz Group. In addition to that, Aston Martin is 2.89 times more volatile than Mercedes Benz Group AG. It trades about -0.08 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  1,389  in Mercedes Benz Group AG on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Mercedes Benz Group AG or generate 7.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Aston Martin Lagonda  vs.  Mercedes Benz Group AG

Aston Martin Lagonda

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mercedes Benz Group AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mercedes-Benz Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aston Martin and Mercedes-Benz Group

The main advantage of trading using opposite Aston Martin and Mercedes-Benz Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aston Martin position performs unexpectedly, Mercedes-Benz Group 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 Group will offset losses from the drop in Mercedes-Benz Group's long position.

The idea behind Aston Martin Lagonda 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.