Correlation Between Porsche Automobile and Mercedes-Benz Group

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

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

Diversification Opportunities for Porsche Automobile and Mercedes-Benz Group

0.89

Correlation Coefficient

Porsche Automobile  Mercedes-Benz Group

Very poor diversification

The 3 months correlation between Porsche and Mercedes-Benz is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group and Porsche Automobile 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 Porsche Automobile Holding are associated (or correlated) with Mercedes-Benz Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of Porsche Automobile i.e., Porsche Automobile and Mercedes-Benz Group go up and down completely randomly.

Pair Corralation between Porsche Automobile and Mercedes-Benz Group

Assuming the 90 days horizon Porsche Automobile is expected to generate 4.5 times less return on investment than Mercedes-Benz Group. But when comparing it to its historical volatility, Porsche Automobile Holding is 1.03 times less risky than Mercedes-Benz Group. It trades about 0.02 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,389  in Mercedes Benz Group AG on December 30, 2024 and sell it today you would earn a total of  113.00  from holding Mercedes Benz Group AG or generate 8.14% return on investment over 90 days.

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

Porsche Automobile Holding  vs.  Mercedes Benz Group AG

Porsche Automobile

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Porsche Automobile Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Porsche Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mercedes Benz Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mercedes Benz Group AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mercedes-Benz Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Porsche Automobile and Mercedes-Benz Group

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

The idea behind Porsche Automobile Holding and Mercedes Benz Group AG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.