Correlation Between INFORMATION SVC and Mercedes-Benz Group

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

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

Diversification Opportunities for INFORMATION SVC and Mercedes-Benz Group

-0.53

Correlation Coefficient

INFORMATION SVC  Mercedes-Benz Group

Excellent diversification

The 3 months correlation between INFORMATION and Mercedes-Benz is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP 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 INFORMATION SVC 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 INFORMATION SVC GRP are associated (or correlated) with Mercedes-Benz Group. 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 INFORMATION SVC i.e., INFORMATION SVC and Mercedes-Benz Group go up and down completely randomly.

Pair Corralation between INFORMATION SVC and Mercedes-Benz Group

Assuming the 90 days horizon INFORMATION SVC GRP is expected to generate 1.42 times more return on investment than Mercedes-Benz Group. However, INFORMATION SVC is 1.42 times more volatile than Mercedes Benz Group AG. It trades about 0.08 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.15 per unit of risk. If you would invest  309.00  in INFORMATION SVC GRP on August 31, 2024 and sell it today you would earn a total of  35.00  from holding INFORMATION SVC GRP or generate 11.33% return on investment over 90 days.

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

INFORMATION SVC GRP  vs.  Mercedes Benz Group AG

INFORMATION SVC GRP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with INFORMATION SVC and Mercedes-Benz Group

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

The idea behind INFORMATION SVC GRP 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 Stocks Directory module to find actively traded stocks across global markets.