Correlation Between MERCK Kommanditgesells and MGC Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both MERCK Kommanditgesells and MGC Pharmaceuticals 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 MERCK Kommanditgesells and MGC Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MERCK Kommanditgesellschaft auf and MGC Pharmaceuticals, you can compare the effects of market volatilities on MERCK Kommanditgesells and MGC Pharmaceuticals 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 MERCK Kommanditgesells with a short position of MGC Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCK Kommanditgesells and MGC Pharmaceuticals.
Diversification Opportunities for MERCK Kommanditgesells and MGC Pharmaceuticals
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MERCK and MGC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MERCK Kommanditgesellschaft au and MGC Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGC Pharmaceuticals and MERCK Kommanditgesells 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 MERCK Kommanditgesellschaft auf are associated (or correlated) with MGC Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGC Pharmaceuticals has no effect on the direction of MERCK Kommanditgesells i.e., MERCK Kommanditgesells and MGC Pharmaceuticals go up and down completely randomly.
Pair Corralation between MERCK Kommanditgesells and MGC Pharmaceuticals
Assuming the 90 days horizon MERCK Kommanditgesellschaft auf is expected to generate 0.51 times more return on investment than MGC Pharmaceuticals. However, MERCK Kommanditgesellschaft auf is 1.94 times less risky than MGC Pharmaceuticals. It trades about -0.01 of its potential returns per unit of risk. MGC Pharmaceuticals is currently generating about -0.06 per unit of risk. If you would invest 17,040 in MERCK Kommanditgesellschaft auf on August 26, 2024 and sell it today you would lose (2,050) from holding MERCK Kommanditgesellschaft auf or give up 12.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 62.1% |
| Values | Daily Returns |
MERCK Kommanditgesellschaft au vs. MGC Pharmaceuticals
Performance |
| Timeline |
| MERCK Kommanditgesells |
| MGC Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
MERCK Kommanditgesells and MGC Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MERCK Kommanditgesells and MGC Pharmaceuticals
The main advantage of trading using opposite MERCK Kommanditgesells and MGC Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCK Kommanditgesells position performs unexpectedly, MGC Pharmaceuticals 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 MGC Pharmaceuticals will offset losses from the drop in MGC Pharmaceuticals' long position.| MERCK Kommanditgesells vs. Greater Cannabis | MERCK Kommanditgesells vs. Merck KGaA ADR | MERCK Kommanditgesells vs. For The Earth | MERCK Kommanditgesells vs. Indo Global Exchange |
| MGC Pharmaceuticals vs. Target Group | MGC Pharmaceuticals vs. Aequus Pharmaceuticals | MGC Pharmaceuticals vs. Filament Health Corp | MGC Pharmaceuticals vs. Sky Century Investment |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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