Correlation Between VOLKSWAGEN and MERCEDES BENZ

Can any of the company-specific risk be diversified away by investing in both VOLKSWAGEN and MERCEDES BENZ 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 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 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of VOLKSWAGEN and MERCEDES BENZ.

Diversification Opportunities for VOLKSWAGEN and MERCEDES BENZ

0.81

Correlation Coefficient

VOLKSWAGEN  MERCEDES BENZ

Very poor diversification

The 3 months correlation between VOLKSWAGEN and MERCEDES is 0.81. 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. 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 go up and down completely randomly.

Pair Corralation between VOLKSWAGEN and MERCEDES BENZ

Assuming the 90 days trading horizon VOLKSWAGEN is expected to generate 2.58 times less return on investment than MERCEDES BENZ. But when comparing it to its historical volatility, VOLKSWAGEN AG VZ is 1.32 times less risky than MERCEDES BENZ. It trades about 0.02 of its potential returns per unit of risk. MERCEDES BENZ GRP ADR14 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,173  in MERCEDES BENZ GRP ADR14 on April 23, 2025 and sell it today you would earn a total of  77.00  from holding MERCEDES BENZ GRP ADR14 or generate 6.56% 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

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VOLKSWAGEN AG VZ are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VOLKSWAGEN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MERCEDES BENZ GRP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MERCEDES BENZ GRP ADR14 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, MERCEDES BENZ may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with VOLKSWAGEN and MERCEDES BENZ

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

The idea behind VOLKSWAGEN AG VZ 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.