Correlation Between DAIMLERCHRYSLER and Western Acquisition

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

Diversification Opportunities for DAIMLERCHRYSLER and Western Acquisition

-0.15

Correlation Coefficient

DAIMLERCHRYSLER  Western Acquisition

Good diversification

The 3 months correlation between DAIMLERCHRYSLER and Western is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding DAIMLERCHRYSLER NORTH AMER and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of DAIMLERCHRYSLER i.e., DAIMLERCHRYSLER and Western Acquisition go up and down completely randomly.

Pair Corralation between DAIMLERCHRYSLER and Western Acquisition

Assuming the 90 days trading horizon DAIMLERCHRYSLER NORTH AMER is expected to generate 0.42 times more return on investment than Western Acquisition. However, DAIMLERCHRYSLER NORTH AMER is 2.39 times less risky than Western Acquisition. It trades about 0.21 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about -0.12 per unit of risk. If you would invest  11,685  in DAIMLERCHRYSLER NORTH AMER on October 25, 2024 and sell it today you would earn a total of  813.00  from holding DAIMLERCHRYSLER NORTH AMER or generate 6.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

DAIMLERCHRYSLER NORTH AMER  vs.  Western Acquisition Ventures

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.

Western Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Acquisition Ventures 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with DAIMLERCHRYSLER and Western Acquisition

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

The idea behind DAIMLERCHRYSLER NORTH AMER and Western Acquisition Ventures 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.