Correlation Between Mercedes Benz and Onxeo SA

Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Onxeo SA 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 Onxeo SA 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 Onxeo SA, you can compare the effects of market volatilities on Mercedes Benz and Onxeo SA 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 Onxeo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Onxeo SA.

Diversification Opportunities for Mercedes Benz and Onxeo SA

0.48

Correlation Coefficient

Mercedes Benz  Onxeo SA

Very weak diversification

The 3 months correlation between Mercedes and Onxeo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Onxeo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onxeo SA 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 Onxeo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onxeo SA has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Onxeo SA go up and down completely randomly.

Pair Corralation between Mercedes Benz and Onxeo SA

Assuming the 90 days horizon Mercedes Benz is expected to generate 64.75 times less return on investment than Onxeo SA. But when comparing it to its historical volatility, Mercedes Benz Group AG is 6.5 times less risky than Onxeo SA. It trades about 0.0 of its potential returns per unit of risk. Onxeo SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Onxeo SA on September 22, 2024 and sell it today you would lose (5.47) from holding Onxeo SA or give up 42.08% of portfolio value over 90 days.

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

Mercedes Benz Group AG  vs.  Onxeo SA

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.

Onxeo SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Onxeo SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Onxeo SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercedes Benz and Onxeo SA

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

The idea behind Mercedes Benz Group AG and Onxeo SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.