Correlation Between Mercedes Benz and Novavax

Can any of the company-specific risk be diversified away by investing in both Mercedes Benz and Novavax 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 Novavax 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 Novavax, you can compare the effects of market volatilities on Mercedes Benz and Novavax 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 Novavax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes Benz and Novavax.

Diversification Opportunities for Mercedes Benz and Novavax

0.74

Correlation Coefficient

Mercedes Benz  Novavax

Poor diversification

The 3 months correlation between Mercedes and Novavax is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Mercedes Benz i.e., Mercedes Benz and Novavax go up and down completely randomly.

Pair Corralation between Mercedes Benz and Novavax

Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 0.27 times more return on investment than Novavax. However, Mercedes Benz Group AG is 3.71 times less risky than Novavax. It trades about 0.0 of its potential returns per unit of risk. Novavax is currently generating about -0.04 per unit of risk. If you would invest  5,611  in Mercedes Benz Group AG on September 12, 2024 and sell it today you would lose (61.00) from holding Mercedes Benz Group AG or give up 1.09% of portfolio value over 90 days.

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

Mercedes Benz Group AG  vs.  Novavax

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.

Novavax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novavax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Pair Trading with Mercedes Benz and Novavax

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

The idea behind Mercedes Benz Group AG and Novavax 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..