Correlation Between Bayerische Motoren and Stellantis

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

By analyzing existing cross correlation between Bayerische Motoren Werke and Stellantis NV, you can compare the effects of market volatilities on Bayerische Motoren and Stellantis 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 Bayerische Motoren with a short position of Stellantis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Stellantis.

Diversification Opportunities for Bayerische Motoren and Stellantis

0.46

Correlation Coefficient

Bayerische Motoren  Stellantis

Very weak diversification

The 3 months correlation between Bayerische and Stellantis is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Stellantis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellantis NV and Bayerische Motoren 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 Bayerische Motoren Werke are associated (or correlated) with Stellantis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellantis NV has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Stellantis go up and down completely randomly.

Pair Corralation between Bayerische Motoren and Stellantis

Assuming the 90 days horizon Bayerische Motoren Werke is expected to under-perform the Stellantis. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bayerische Motoren Werke is 1.4 times less risky than Stellantis. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Stellantis NV is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,519  in Stellantis NV on September 15, 2024 and sell it today you would lose (148.00) from holding Stellantis NV or give up 9.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Bayerische Motoren Werke  vs.  Stellantis NV

Bayerische Motoren Werke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayerische Motoren Werke has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bayerische Motoren and Stellantis

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

The idea behind Bayerische Motoren Werke and Stellantis NV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.