Correlation Between Golden Developing and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Golden Developing 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 Golden Developing and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Developing Solutions and Merck KGaA ADR, you can compare the effects of market volatilities on Golden Developing 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 Golden Developing with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Developing and Merck KGaA.
Diversification Opportunities for Golden Developing and Merck KGaA
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Golden and Merck is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Golden Developing Solutions 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 Golden Developing 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 Golden Developing Solutions 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 Golden Developing i.e., Golden Developing and Merck KGaA go up and down completely randomly.
Pair Corralation between Golden Developing and Merck KGaA
If you would invest 0.01 in Golden Developing Solutions on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Golden Developing Solutions or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golden Developing Solutions vs. Merck KGaA ADR
Performance |
| Timeline |
| Golden Developing |
| Merck KGaA ADR |
Golden Developing and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Developing and Merck KGaA
The main advantage of trading using opposite Golden Developing and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Developing 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.| Golden Developing vs. Cann American Corp | Golden Developing vs. GelStat Corp | Golden Developing vs. Green Cures Botanical | Golden Developing vs. Rimrock Gold Corp |
| Merck KGaA vs. Recruit Holdings Co | Merck KGaA vs. Fresenius SE Co | Merck KGaA vs. Straumann Holding AG | Merck KGaA vs. MERCK Kommanditgesellschaft auf |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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