Correlation Between Merck KGaA and Endexx Corp
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Endexx 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 Endexx 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 Endexx Corp, you can compare the effects of market volatilities on Merck KGaA and Endexx 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 Endexx Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Endexx Corp.
Diversification Opportunities for Merck KGaA and Endexx Corp
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Endexx is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Endexx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endexx 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 Endexx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endexx Corp has no effect on the direction of Merck KGaA i.e., Merck KGaA and Endexx Corp go up and down completely randomly.
Pair Corralation between Merck KGaA and Endexx Corp
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Endexx Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 5.47 times less risky than Endexx Corp. The pink sheet trades about -0.3 of its potential returns per unit of risk. The Endexx Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1.12 in Endexx Corp on September 1, 2024 and sell it today you would lose (0.12) from holding Endexx Corp or give up 10.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Endexx Corp
Performance |
| Timeline |
| Merck KGaA ADR |
| Endexx Corp |
Merck KGaA and Endexx Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Endexx Corp
The main advantage of trading using opposite Merck KGaA and Endexx Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Endexx 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 Endexx Corp will offset losses from the drop in Endexx Corp's long position.| Merck KGaA vs. Holloman Energy Corp | Merck KGaA vs. cbdMD Inc | Merck KGaA vs. Evolus Inc | Merck KGaA vs. CV Sciences |
| Endexx Corp vs. Holloman Energy Corp | Endexx Corp vs. cbdMD Inc | Endexx Corp vs. Evolus Inc | Endexx Corp vs. CV Sciences |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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