Correlation Between CSL and Mercedes Benz

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

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

Diversification Opportunities for CSL and Mercedes Benz

0.39

Correlation Coefficient

CSL  Mercedes Benz

Weak diversification

The 3 months correlation between CSL and Mercedes is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited 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 CSL 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 CSL Limited 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 CSL i.e., CSL and Mercedes Benz go up and down completely randomly.

Pair Corralation between CSL and Mercedes Benz

Assuming the 90 days horizon CSL Limited is expected to generate 0.85 times more return on investment than Mercedes Benz. However, CSL Limited is 1.18 times less risky than Mercedes Benz. It trades about 0.05 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about 0.02 per unit of risk. If you would invest  14,456  in CSL Limited on May 3, 2025 and sell it today you would earn a total of  664.00  from holding CSL Limited or generate 4.59% return on investment over 90 days.

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

CSL Limited  vs.  Mercedes Benz Group AG

CSL Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CSL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Mercedes Benz Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mercedes Benz Group AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 CSL and Mercedes Benz

The main advantage of trading using opposite CSL and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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 CSL Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.