Correlation Between MAHLE Metal and Vodafone Group

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

By analyzing existing cross correlation between MAHLE Metal Leve and Vodafone Group Public, you can compare the effects of market volatilities on MAHLE Metal and Vodafone 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 MAHLE Metal with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAHLE Metal and Vodafone Group.

Diversification Opportunities for MAHLE Metal and Vodafone Group

0.11

Correlation Coefficient

MAHLE Metal  Vodafone Group

Average diversification

The 3 months correlation between MAHLE and Vodafone is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and Vodafone Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group Public and MAHLE Metal 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 MAHLE Metal Leve are associated (or correlated) with Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group Public has no effect on the direction of MAHLE Metal i.e., MAHLE Metal and Vodafone Group go up and down completely randomly.

Pair Corralation between MAHLE Metal and Vodafone Group

Assuming the 90 days trading horizon MAHLE Metal Leve is expected to under-perform the Vodafone Group. But the stock apears to be less risky and, when comparing its historical volatility, MAHLE Metal Leve is 1.13 times less risky than Vodafone Group. The stock trades about -0.14 of its potential returns per unit of risk. The Vodafone Group Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,592  in Vodafone Group Public on October 7, 2024 and sell it today you would lose (1.00) from holding Vodafone Group Public or give up 0.04% of portfolio value over 90 days.

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

MAHLE Metal Leve  vs.  Vodafone Group Public

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Vodafone Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vodafone Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MAHLE Metal and Vodafone Group

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

The idea behind MAHLE Metal Leve and Vodafone Group Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.