Correlation Between Mercedes Benz and HANOVER INSURANCE

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

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

Diversification Opportunities for Mercedes Benz and HANOVER INSURANCE

-0.87

Correlation Coefficient

Mercedes Benz  HANOVER INSURANCE

Pay attention - limited upside

The 3 months correlation between Mercedes and HANOVER is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE 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 AG are associated (or correlated) with HANOVER INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANOVER INSURANCE has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and HANOVER INSURANCE go up and down completely randomly.

Pair Corralation between Mercedes Benz and HANOVER INSURANCE

Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 1.07 times more return on investment than HANOVER INSURANCE. However, Mercedes Benz is 1.07 times more volatile than HANOVER INSURANCE. It trades about 0.24 of its potential returns per unit of risk. HANOVER INSURANCE is currently generating about -0.12 per unit of risk. If you would invest  5,214  in Mercedes Benz Group AG on September 13, 2024 and sell it today you would earn a total of  362.00  from holding Mercedes Benz Group AG or generate 6.94% return on investment over 90 days.

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

Mercedes Benz Group AG  vs.  HANOVER INSURANCE

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

HANOVER INSURANCE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HANOVER INSURANCE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HANOVER INSURANCE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mercedes Benz and HANOVER INSURANCE

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

The idea behind Mercedes Benz Group AG and HANOVER INSURANCE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..