Correlation Between Merck KGaA and Bionoid Pharma
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Bionoid Pharma 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 Bionoid Pharma 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 Bionoid Pharma, you can compare the effects of market volatilities on Merck KGaA and Bionoid Pharma 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 Bionoid Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Bionoid Pharma.
Diversification Opportunities for Merck KGaA and Bionoid Pharma
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Bionoid is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Bionoid Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bionoid Pharma 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 Bionoid Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bionoid Pharma has no effect on the direction of Merck KGaA i.e., Merck KGaA and Bionoid Pharma go up and down completely randomly.
Pair Corralation between Merck KGaA and Bionoid Pharma
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Bionoid Pharma. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 27.98 times less risky than Bionoid Pharma. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Bionoid Pharma is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 100.00 in Bionoid Pharma on November 2, 2024 and sell it today you would lose (72.00) from holding Bionoid Pharma or give up 72.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Merck KGaA ADR vs. Bionoid Pharma
Performance |
| Timeline |
| Merck KGaA ADR |
| Bionoid Pharma |
Merck KGaA and Bionoid Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Bionoid Pharma
The main advantage of trading using opposite Merck KGaA and Bionoid Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Bionoid Pharma 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 Bionoid Pharma will offset losses from the drop in Bionoid Pharma'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 |
| Bionoid Pharma vs. Weibo Corp | Bionoid Pharma vs. Tandem Diabetes Care | Bionoid Pharma vs. Cardinal Health | Bionoid Pharma vs. Space Communication |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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