Correlation Between Merck KGaA and Alterola Biotech
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Alterola Biotech 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 KGaA and Alterola Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA ADR and Alterola Biotech, you can compare the effects of market volatilities on Merck KGaA and Alterola Biotech 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 KGaA with a short position of Alterola Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Alterola Biotech.
Diversification Opportunities for Merck KGaA and Alterola Biotech
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Alterola is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Alterola Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alterola Biotech and Merck KGaA 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 KGaA ADR are associated (or correlated) with Alterola Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alterola Biotech has no effect on the direction of Merck KGaA i.e., Merck KGaA and Alterola Biotech go up and down completely randomly.
Pair Corralation between Merck KGaA and Alterola Biotech
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Alterola Biotech. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 11.25 times less risky than Alterola Biotech. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Alterola Biotech is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.61 in Alterola Biotech on November 2, 2024 and sell it today you would lose (0.25) from holding Alterola Biotech or give up 40.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.17% |
| Values | Daily Returns |
Merck KGaA ADR vs. Alterola Biotech
Performance |
| Timeline |
| Merck KGaA ADR |
| Alterola Biotech |
Merck KGaA and Alterola Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Alterola Biotech
The main advantage of trading using opposite Merck KGaA and Alterola Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Alterola Biotech 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 Alterola Biotech will offset losses from the drop in Alterola Biotech's long position.| Merck KGaA vs. Recruit Holdings Co | Merck KGaA vs. Fresenius SE Co | Merck KGaA vs. Straumann Holding AG | Merck KGaA vs. MERCK Kommanditgesellschaft auf |
| Alterola Biotech vs. Amexdrug | Alterola Biotech vs. Aion Therapeutic | Alterola Biotech vs. The BC Bud | Alterola Biotech vs. Crescita Therapeutics |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |