Correlation Between Mercedes Benz and GM

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Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and GM 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 Mercedes Benz and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercedes Benz Group and General Motors, you can compare the effects of market volatilities on Mercedes Benz and GM 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 Mercedes Benz with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and GM.

Diversification Opportunities for Mercedes Benz and GM

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Mercedes and GM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and Mercedes Benz 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 Mercedes Benz Group are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and GM go up and down completely randomly.

Pair Corralation between Mercedes Benz and GM

If you would invest  4,000  in General Motors on December 29, 2023 and sell it today you would earn a total of  459.00  from holding General Motors or generate 11.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Mercedes Benz Group  vs.  General Motors

 Performance 
       Timeline  
Mercedes Benz Group 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Mercedes Benz Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Mercedes Benz is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
General Motors 

Risk-Adjusted Performance

17 of 100

 
Low
 
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Good
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Mercedes Benz and GM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mercedes Benz and GM

The main advantage of trading using opposite Mercedes Benz and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes Benz position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.
The idea behind Mercedes Benz Group and General Motors 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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