Correlation Between VOLKSWAGEN and MERCEDES-BENZ GRP
Can any of the company-specific risk be diversified away by investing in both VOLKSWAGEN 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 VOLKSWAGEN 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 VOLKSWAGEN AG VZ and MERCEDES BENZ GRP ADR14, you can compare the effects of market volatilities on VOLKSWAGEN 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 VOLKSWAGEN with a short position of MERCEDES-BENZ GRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLKSWAGEN and MERCEDES-BENZ GRP.
Diversification Opportunities for VOLKSWAGEN and MERCEDES-BENZ GRP
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VOLKSWAGEN and MERCEDES-BENZ is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding VOLKSWAGEN AG VZ 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 VOLKSWAGEN 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 VOLKSWAGEN AG VZ 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 VOLKSWAGEN i.e., VOLKSWAGEN and MERCEDES-BENZ GRP go up and down completely randomly.
Pair Corralation between VOLKSWAGEN and MERCEDES-BENZ GRP
Assuming the 90 days trading horizon VOLKSWAGEN AG VZ is expected to generate 0.54 times more return on investment than MERCEDES-BENZ GRP. However, VOLKSWAGEN AG VZ is 1.83 times less risky than MERCEDES-BENZ GRP. It trades about 0.26 of its potential returns per unit of risk. MERCEDES BENZ GRP ADR14 is currently generating about 0.04 per unit of risk. If you would invest 805.00 in VOLKSWAGEN AG VZ on September 26, 2024 and sell it today you would earn a total of 60.00 from holding VOLKSWAGEN AG VZ or generate 7.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
VOLKSWAGEN AG VZ vs. MERCEDES BENZ GRP ADR14
Performance |
Timeline |
VOLKSWAGEN AG VZ |
MERCEDES BENZ GRP |
VOLKSWAGEN and MERCEDES-BENZ GRP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with VOLKSWAGEN and MERCEDES-BENZ GRP
The main advantage of trading using opposite VOLKSWAGEN and MERCEDES-BENZ GRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VOLKSWAGEN 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.VOLKSWAGEN vs. BYD Company Limited | VOLKSWAGEN vs. MERCEDES BENZ GRP ADR14 | VOLKSWAGEN vs. VOLKSWAGEN ADR 110ON | VOLKSWAGEN vs. Volkswagen AG |
MERCEDES-BENZ GRP vs. BYD Company Limited | MERCEDES-BENZ GRP vs. VOLKSWAGEN ADR 110ON | MERCEDES-BENZ GRP vs. VOLKSWAGEN AG VZ | MERCEDES-BENZ GRP vs. Volkswagen AG |
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.
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