Correlation Between UPDATE SOFTWARE and MERCEDES-BENZ GRP

Can any of the company-specific risk be diversified away by investing in both UPDATE SOFTWARE and MERCEDES-BENZ GRP 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 UPDATE SOFTWARE and MERCEDES-BENZ GRP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UPDATE SOFTWARE and MERCEDES BENZ GRP ADR14, you can compare the effects of market volatilities on UPDATE SOFTWARE and MERCEDES-BENZ GRP 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 UPDATE SOFTWARE with a short position of MERCEDES-BENZ GRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPDATE SOFTWARE and MERCEDES-BENZ GRP.

Diversification Opportunities for UPDATE SOFTWARE and MERCEDES-BENZ GRP

-0.4

Correlation Coefficient

UPDATE SOFTWARE  MERCEDES-BENZ GRP

Very good diversification

The 3 months correlation between UPDATE and MERCEDES-BENZ is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding UPDATE SOFTWARE and MERCEDES BENZ GRP ADR14 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MERCEDES BENZ GRP and UPDATE SOFTWARE 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 UPDATE SOFTWARE are associated (or correlated) with MERCEDES-BENZ GRP. 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 GRP has no effect on the direction of UPDATE SOFTWARE i.e., UPDATE SOFTWARE and MERCEDES-BENZ GRP go up and down completely randomly.

Pair Corralation between UPDATE SOFTWARE and MERCEDES-BENZ GRP

Assuming the 90 days trading horizon UPDATE SOFTWARE is expected to under-perform the MERCEDES-BENZ GRP. In addition to that, UPDATE SOFTWARE is 1.19 times more volatile than MERCEDES BENZ GRP ADR14. It trades about -0.11 of its total potential returns per unit of risk. MERCEDES BENZ GRP ADR14 is currently generating about 0.1 per unit of volatility. If you would invest  1,290  in MERCEDES BENZ GRP ADR14 on December 26, 2024 and sell it today you would earn a total of  190.00  from holding MERCEDES BENZ GRP ADR14 or generate 14.73% return on investment over 90 days.

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

UPDATE SOFTWARE  vs.  MERCEDES BENZ GRP ADR14

UPDATE SOFTWARE

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPDATE SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MERCEDES BENZ GRP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MERCEDES BENZ GRP ADR14 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, MERCEDES-BENZ GRP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UPDATE SOFTWARE and MERCEDES-BENZ GRP

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

The idea behind UPDATE SOFTWARE and MERCEDES BENZ GRP ADR14 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.