Correlation Between Mercedes-Benz Group and Bayerische Motoren

Can any of the company-specific risk be diversified away by investing in both Mercedes-Benz Group and Bayerische Motoren 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 Group and Bayerische Motoren 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 Bayerische Motoren Werke, you can compare the effects of market volatilities on Mercedes-Benz Group and Bayerische Motoren 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 Group with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes-Benz Group and Bayerische Motoren.

Diversification Opportunities for Mercedes-Benz Group and Bayerische Motoren

0.0

Correlation Coefficient

Mercedes-Benz Group  Bayerische Motoren

Pay attention - limited upside

The 3 months correlation between Mercedes-Benz and Bayerische is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and Mercedes-Benz Group 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Mercedes-Benz Group i.e., Mercedes-Benz Group and Bayerische Motoren go up and down completely randomly.

Pair Corralation between Mercedes-Benz Group and Bayerische Motoren

If you would invest  1,512  in Mercedes Benz Group AG on November 28, 2024 and sell it today you would earn a total of  81.00  from holding Mercedes Benz Group AG or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Mercedes Benz Group AG  vs.  Bayerische Motoren Werke

Mercedes Benz Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mercedes Benz Group AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mercedes-Benz Group showed solid returns over the last few months and may actually be approaching a breakup point.

Bayerische Motoren Werke

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bayerische Motoren Werke has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bayerische Motoren is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mercedes-Benz Group and Bayerische Motoren

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

The idea behind Mercedes Benz Group AG and Bayerische Motoren Werke 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.