Correlation Between Mercedes Benz and Great Wall

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

Diversification Opportunities for Mercedes Benz and Great Wall

0.5

Correlation Coefficient

Mercedes Benz  Great Wall

Very weak diversification

The 3 months correlation between Mercedes and Great is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor 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 Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Great Wall go up and down completely randomly.

Pair Corralation between Mercedes Benz and Great Wall

Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Great Wall. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 2.84 times less risky than Great Wall. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Great Wall Motor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Great Wall Motor on October 7, 2024 and sell it today you would lose (1.00) from holding Great Wall Motor or give up 0.6% 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.  Great Wall Motor

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Great Wall Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wall Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mercedes Benz and Great Wall

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

The idea behind Mercedes Benz Group AG and Great Wall Motor 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.