Correlation Between Superior Plus and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Superior Plus 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 Superior Plus and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Superior Plus Corp and Merck KGaA, you can compare the effects of market volatilities on Superior Plus 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 Superior Plus with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Merck KGaA.
Diversification Opportunities for Superior Plus and Merck KGaA
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Superior and Merck is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Merck KGaA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Merck KGaA go up and down completely randomly.
Pair Corralation between Superior Plus and Merck KGaA
Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Merck KGaA. In addition to that, Superior Plus is 1.66 times more volatile than Merck KGaA. It trades about -0.07 of its total potential returns per unit of risk. Merck KGaA is currently generating about -0.02 per unit of volatility. If you would invest 15,195 in Merck KGaA on September 3, 2024 and sell it today you would lose (1,035) from holding Merck KGaA or give up 6.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Superior Plus Corp vs. Merck KGaA
Performance |
| Timeline |
| Superior Plus Corp |
| Merck KGaA |
Superior Plus and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Superior Plus and Merck KGaA
The main advantage of trading using opposite Superior Plus and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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.| Superior Plus vs. Collins Foods Limited | Superior Plus vs. Thai Beverage Public | Superior Plus vs. ADRIATIC METALS LS 013355 | Superior Plus vs. Lifeway Foods |
| Merck KGaA vs. Gol Intelligent Airlines | Merck KGaA vs. BJs Wholesale Club | Merck KGaA vs. Fast Retailing Co | Merck KGaA vs. JAPAN AIRLINES |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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