Correlation Between Merck KGaA and Cresco Labs
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Cresco Labs 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 Cresco Labs 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 Cresco Labs, you can compare the effects of market volatilities on Merck KGaA and Cresco Labs 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 Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Cresco Labs.
Diversification Opportunities for Merck KGaA and Cresco Labs
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Cresco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs 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 Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of Merck KGaA i.e., Merck KGaA and Cresco Labs go up and down completely randomly.
Pair Corralation between Merck KGaA and Cresco Labs
Assuming the 90 days horizon Merck KGaA ADR is expected to generate 0.41 times more return on investment than Cresco Labs. However, Merck KGaA ADR is 2.46 times less risky than Cresco Labs. It trades about 0.16 of its potential returns per unit of risk. Cresco Labs is currently generating about -0.02 per unit of risk. If you would invest 2,867 in Merck KGaA ADR on November 3, 2024 and sell it today you would earn a total of 159.00 from holding Merck KGaA ADR or generate 5.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Cresco Labs
Performance |
| Timeline |
| Merck KGaA ADR |
| Cresco Labs |
Merck KGaA and Cresco Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Cresco Labs
The main advantage of trading using opposite Merck KGaA and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Cresco Labs 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 Cresco Labs will offset losses from the drop in Cresco Labs' 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 |
| Cresco Labs vs. Verano Holdings Corp | Cresco Labs vs. AYR Strategies Class | Cresco Labs vs. Green Thumb Industries | Cresco Labs vs. Marimed |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |