Correlation Between Cann American and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Cann American 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 Cann American and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cann American Corp and Merck KGaA ADR, you can compare the effects of market volatilities on Cann American 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 Cann American with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cann American and Merck KGaA.
Diversification Opportunities for Cann American and Merck KGaA
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cann and Merck is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cann American Corp and Merck KGaA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA ADR and Cann American 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 Cann American 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 ADR has no effect on the direction of Cann American i.e., Cann American and Merck KGaA go up and down completely randomly.
Pair Corralation between Cann American and Merck KGaA
Given the investment horizon of 90 days Cann American Corp is expected to under-perform the Merck KGaA. In addition to that, Cann American is 11.79 times more volatile than Merck KGaA ADR. It trades about -0.06 of its total potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.34 per unit of volatility. If you would invest 3,340 in Merck KGaA ADR on September 2, 2024 and sell it today you would lose (351.00) from holding Merck KGaA ADR or give up 10.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cann American Corp vs. Merck KGaA ADR
Performance |
| Timeline |
| Cann American Corp |
| Merck KGaA ADR |
Cann American and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cann American and Merck KGaA
The main advantage of trading using opposite Cann American and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cann American 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.| Cann American vs. XCPCNL Business Services | Cann American vs. Golden Developing Solutions | Cann American vs. Indo Global Exchange | Cann American vs. Cgrowth Capital |
| Merck KGaA vs. Holloman Energy Corp | Merck KGaA vs. cbdMD Inc | Merck KGaA vs. Evolus Inc | Merck KGaA vs. CV Sciences |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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