Correlation Between MERCEDES-BENZ GRP and Ross Stores

Can any of the company-specific risk be diversified away by investing in both MERCEDES-BENZ GRP and Ross Stores 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 MERCEDES-BENZ GRP and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MERCEDES BENZ GRP ADR14 and Ross Stores, you can compare the effects of market volatilities on MERCEDES-BENZ GRP and Ross Stores 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 MERCEDES-BENZ GRP with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCEDES-BENZ GRP and Ross Stores.

Diversification Opportunities for MERCEDES-BENZ GRP and Ross Stores

-0.42

Correlation Coefficient

MERCEDES-BENZ GRP  Ross Stores

Very good diversification

The 3 months correlation between MERCEDES-BENZ and Ross is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding MERCEDES BENZ GRP ADR14 and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and MERCEDES-BENZ GRP 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 MERCEDES BENZ GRP ADR14 are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of MERCEDES-BENZ GRP i.e., MERCEDES-BENZ GRP and Ross Stores go up and down completely randomly.

Pair Corralation between MERCEDES-BENZ GRP and Ross Stores

Assuming the 90 days trading horizon MERCEDES BENZ GRP ADR14 is expected to generate 2.0 times more return on investment than Ross Stores. However, MERCEDES-BENZ GRP is 2.0 times more volatile than Ross Stores. It trades about 0.08 of its potential returns per unit of risk. Ross Stores is currently generating about 0.08 per unit of risk. If you would invest  1,310  in MERCEDES BENZ GRP ADR14 on October 9, 2024 and sell it today you would earn a total of  40.00  from holding MERCEDES BENZ GRP ADR14 or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

MERCEDES BENZ GRP ADR14  vs.  Ross Stores

MERCEDES BENZ GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MERCEDES BENZ GRP ADR14 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, MERCEDES-BENZ GRP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ross Stores

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ross Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MERCEDES-BENZ GRP and Ross Stores

The main advantage of trading using opposite MERCEDES-BENZ GRP and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCEDES-BENZ GRP position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.

The idea behind MERCEDES BENZ GRP ADR14 and Ross Stores 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.