Correlation Between Gladstone Investment and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Gladstone Investment and Merck KGaA 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 Gladstone Investment and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gladstone Investment and Merck KGaA, you can compare the effects of market volatilities on Gladstone Investment and Merck KGaA 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 Gladstone Investment with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and Merck KGaA.
Diversification Opportunities for Gladstone Investment and Merck KGaA
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gladstone and Merck is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Merck KGaA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA and Gladstone Investment 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 Gladstone Investment are associated (or correlated) with Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Merck KGaA go up and down completely randomly.
Pair Corralation between Gladstone Investment and Merck KGaA
Assuming the 90 days horizon Gladstone Investment is expected to generate 1.09 times more return on investment than Merck KGaA. However, Gladstone Investment is 1.09 times more volatile than Merck KGaA. It trades about 0.11 of its potential returns per unit of risk. Merck KGaA is currently generating about -0.14 per unit of risk. If you would invest 1,255 in Gladstone Investment on September 13, 2024 and sell it today you would earn a total of 41.00 from holding Gladstone Investment or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Gladstone Investment vs. Merck KGaA
Performance |
| Timeline |
| Gladstone Investment |
| Merck KGaA |
Gladstone Investment and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gladstone Investment and Merck KGaA
The main advantage of trading using opposite Gladstone Investment and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gladstone Investment position performs unexpectedly, Merck KGaA 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 Merck KGaA will offset losses from the drop in Merck KGaA's long position.| Gladstone Investment vs. Lyxor 1 | Gladstone Investment vs. Xtrackers ShortDAX | Gladstone Investment vs. Xtrackers LevDAX |
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Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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