Correlation Between Merck KGaA and Digital Uts
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Digital Uts 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 Digital Uts 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 Digital Uts Ventures, you can compare the effects of market volatilities on Merck KGaA and Digital Uts 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 Digital Uts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Digital Uts.
Diversification Opportunities for Merck KGaA and Digital Uts
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Digital is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Digital Uts Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Uts Ventures 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 Digital Uts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Uts Ventures has no effect on the direction of Merck KGaA i.e., Merck KGaA and Digital Uts go up and down completely randomly.
Pair Corralation between Merck KGaA and Digital Uts
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Digital Uts. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 4.57 times less risky than Digital Uts. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Digital Uts Ventures is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.20 in Digital Uts Ventures on September 3, 2024 and sell it today you would lose (0.31) from holding Digital Uts Ventures or give up 25.83% 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. Digital Uts Ventures
Performance |
| Timeline |
| Merck KGaA ADR |
| Digital Uts Ventures |
Merck KGaA and Digital Uts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Digital Uts
The main advantage of trading using opposite Merck KGaA and Digital Uts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Digital Uts 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 Digital Uts will offset losses from the drop in Digital Uts' long position.| Merck KGaA vs. Green Cures Botanical | Merck KGaA vs. Cann American Corp | Merck KGaA vs. Galexxy Holdings | Merck KGaA vs. Indoor Harvest Corp |
| Digital Uts vs. Bionoid Pharma | Digital Uts vs. Centr Brands Corp | Digital Uts vs. CTT Pharmaceutical Holdings | Digital Uts vs. Alterola Biotech |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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