Correlation Between Global Hemp and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Global Hemp 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 Global Hemp and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Hemp Group and Merck KGaA ADR, you can compare the effects of market volatilities on Global Hemp 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 Global Hemp with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Hemp and Merck KGaA.
Diversification Opportunities for Global Hemp and Merck KGaA
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Merck is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global Hemp Group 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 Global Hemp 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 Global Hemp Group 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 Global Hemp i.e., Global Hemp and Merck KGaA go up and down completely randomly.
Pair Corralation between Global Hemp and Merck KGaA
Assuming the 90 days horizon Global Hemp Group is expected to generate 12.04 times more return on investment than Merck KGaA. However, Global Hemp is 12.04 times more volatile than Merck KGaA ADR. It trades about 0.08 of its potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.39 per unit of risk. If you would invest 1.50 in Global Hemp Group on August 25, 2024 and sell it today you would earn a total of 0.00 from holding Global Hemp Group or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Hemp Group vs. Merck KGaA ADR
Performance |
| Timeline |
| Global Hemp Group |
| Merck KGaA ADR |
Global Hemp and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Hemp and Merck KGaA
The main advantage of trading using opposite Global Hemp and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Hemp 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.| Global Hemp vs. Green Cures Botanical | Global Hemp vs. Galexxy Holdings | Global Hemp vs. Indoor Harvest Corp | Global Hemp vs. Speakeasy Cannabis Club |
| Merck KGaA vs. Green Cures Botanical | Merck KGaA vs. Galexxy Holdings | Merck KGaA vs. Indoor Harvest Corp | Merck KGaA vs. Speakeasy Cannabis Club |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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