Correlation Between Mercedes Benz and BioNTech

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

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

Diversification Opportunities for Mercedes Benz and BioNTech

0.02

Correlation Coefficient

Mercedes Benz  BioNTech

Significant diversification

The 3 months correlation between Mercedes and BioNTech is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and BioNTech SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioNTech SE and Mercedes Benz 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 Group AG are associated (or correlated) with BioNTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioNTech SE has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and BioNTech go up and down completely randomly.

Pair Corralation between Mercedes Benz and BioNTech

Assuming the 90 days horizon Mercedes Benz is expected to generate 1.56 times less return on investment than BioNTech. But when comparing it to its historical volatility, Mercedes Benz Group AG is 2.07 times less risky than BioNTech. It trades about 0.11 of its potential returns per unit of risk. BioNTech SE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,300  in BioNTech SE on September 22, 2024 and sell it today you would earn a total of  450.00  from holding BioNTech SE or generate 4.37% return on investment over 90 days.

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

Mercedes Benz Group AG  vs.  BioNTech SE

Mercedes Benz Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercedes Benz Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mercedes Benz is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BioNTech SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BioNTech SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BioNTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mercedes Benz and BioNTech

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

The idea behind Mercedes Benz Group AG and BioNTech SE 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.