Correlation Between Air Lease and Mercedes Benz

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

By analyzing existing cross correlation between Air Lease and Mercedes Benz Group AG, you can compare the effects of market volatilities on Air Lease 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 Air Lease with a short position of Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Mercedes Benz.

Diversification Opportunities for Air Lease and Mercedes Benz

-0.83

Correlation Coefficient

Air Lease  Mercedes Benz

Pay attention - limited upside

The 3 months correlation between Air and Mercedes is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group and Air Lease 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 Air Lease 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 Group has no effect on the direction of Air Lease i.e., Air Lease and Mercedes Benz go up and down completely randomly.

Pair Corralation between Air Lease and Mercedes Benz

Assuming the 90 days trading horizon Air Lease is expected to generate 4.72 times less return on investment than Mercedes Benz. In addition to that, Air Lease is 1.36 times more volatile than Mercedes Benz Group AG. It trades about 0.05 of its total potential returns per unit of risk. Mercedes Benz Group AG is currently generating about 0.29 per unit of volatility. If you would invest  5,229  in Mercedes Benz Group AG on September 15, 2024 and sell it today you would earn a total of  401.00  from holding Mercedes Benz Group AG or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Air Lease  vs.  Mercedes Benz Group AG

Air Lease

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Mercedes Benz Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Air Lease and Mercedes Benz

The main advantage of trading using opposite Air Lease and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease 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 Air Lease and Mercedes Benz Group AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.