Correlation Between Mercedes Benz and Suzuki

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

Diversification Opportunities for Mercedes Benz and Suzuki

-0.56

Correlation Coefficient

Mercedes Benz  Suzuki

Excellent diversification

The 3 months correlation between Mercedes and Suzuki is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Suzuki Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzuki Motor Corp 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 Suzuki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzuki Motor Corp has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Suzuki go up and down completely randomly.

Pair Corralation between Mercedes Benz and Suzuki

Assuming the 90 days horizon Mercedes Benz Group AG is expected to under-perform the Suzuki. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mercedes Benz Group AG is 1.09 times less risky than Suzuki. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Suzuki Motor Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,995  in Suzuki Motor Corp on October 21, 2024 and sell it today you would earn a total of  516.00  from holding Suzuki Motor Corp or generate 12.92% return on investment over 90 days.

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

Mercedes Benz Group AG  vs.  Suzuki Motor Corp

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Suzuki Motor Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzuki Motor Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Suzuki showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercedes Benz and Suzuki

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

The idea behind Mercedes Benz Group AG and Suzuki Motor Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.