Correlation Between Merck KGaA and Centr Brands Corp
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Centr Brands Corp 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 Centr Brands Corp 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 Centr Brands Corp, you can compare the effects of market volatilities on Merck KGaA and Centr Brands Corp 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 Centr Brands Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Centr Brands Corp.
Diversification Opportunities for Merck KGaA and Centr Brands Corp
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Centr is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Centr Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centr Brands Corp 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 Centr Brands Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centr Brands Corp has no effect on the direction of Merck KGaA i.e., Merck KGaA and Centr Brands Corp go up and down completely randomly.
Pair Corralation between Merck KGaA and Centr Brands Corp
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Centr Brands Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 25.51 times less risky than Centr Brands Corp. The pink sheet trades about -0.32 of its potential returns per unit of risk. The Centr Brands Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Centr Brands Corp on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Centr Brands Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Centr Brands Corp
Performance |
| Timeline |
| Merck KGaA ADR |
| Centr Brands Corp |
Merck KGaA and Centr Brands Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Centr Brands Corp
The main advantage of trading using opposite Merck KGaA and Centr Brands Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Centr Brands Corp 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 Centr Brands Corp will offset losses from the drop in Centr Brands Corp'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 |
| Centr Brands Corp vs. Bionoid Pharma | Centr Brands Corp vs. CTT Pharmaceutical Holdings | Centr Brands Corp vs. Alterola Biotech | Centr Brands Corp vs. Canntab Therapeutics Limited |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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