Correlation Between DAIMLERCHRYSLER and CVR Partners

Can any of the company-specific risk be diversified away by investing in both DAIMLERCHRYSLER and CVR Partners 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 DAIMLERCHRYSLER and CVR Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DAIMLERCHRYSLER NORTH AMER and CVR Partners LP, you can compare the effects of market volatilities on DAIMLERCHRYSLER and CVR Partners 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 DAIMLERCHRYSLER with a short position of CVR Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIMLERCHRYSLER and CVR Partners.

Diversification Opportunities for DAIMLERCHRYSLER and CVR Partners

0.17

Correlation Coefficient

DAIMLERCHRYSLER  CVR Partners

Average diversification

The 3 months correlation between DAIMLERCHRYSLER and CVR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding DAIMLERCHRYSLER NORTH AMER and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP and DAIMLERCHRYSLER 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 DAIMLERCHRYSLER NORTH AMER are associated (or correlated) with CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of DAIMLERCHRYSLER i.e., DAIMLERCHRYSLER and CVR Partners go up and down completely randomly.

Pair Corralation between DAIMLERCHRYSLER and CVR Partners

Assuming the 90 days trading horizon DAIMLERCHRYSLER NORTH AMER is expected to generate 20.52 times more return on investment than CVR Partners. However, DAIMLERCHRYSLER is 20.52 times more volatile than CVR Partners LP. It trades about 0.04 of its potential returns per unit of risk. CVR Partners LP is currently generating about 0.03 per unit of risk. If you would invest  12,474  in DAIMLERCHRYSLER NORTH AMER on October 21, 2024 and sell it today you would earn a total of  24.00  from holding DAIMLERCHRYSLER NORTH AMER or generate 0.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.61%
Values	Daily Returns

DAIMLERCHRYSLER NORTH AMER  vs.  CVR Partners LP

DAIMLERCHRYSLER NORTH

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DAIMLERCHRYSLER NORTH AMER are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DAIMLERCHRYSLER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CVR Partners LP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, CVR Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAIMLERCHRYSLER and CVR Partners

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

The idea behind DAIMLERCHRYSLER NORTH AMER and CVR Partners LP 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.