Correlation Between Merck KGaA and Global Hemp
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Global Hemp 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 Global Hemp 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 Global Hemp Group, you can compare the effects of market volatilities on Merck KGaA and Global Hemp 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 Global Hemp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Global Hemp.
Diversification Opportunities for Merck KGaA and Global Hemp
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Global is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Global Hemp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hemp Group 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 Global Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hemp Group has no effect on the direction of Merck KGaA i.e., Merck KGaA and Global Hemp go up and down completely randomly.
Pair Corralation between Merck KGaA and Global Hemp
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Global Hemp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 38.06 times less risky than Global Hemp. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Global Hemp Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.55 in Global Hemp Group on August 25, 2024 and sell it today you would earn a total of 0.95 from holding Global Hemp Group or generate 172.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Global Hemp Group
Performance |
| Timeline |
| Merck KGaA ADR |
| Global Hemp Group |
Merck KGaA and Global Hemp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Global Hemp
The main advantage of trading using opposite Merck KGaA and Global Hemp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Global Hemp 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 Global Hemp will offset losses from the drop in Global Hemp's long position.| Merck KGaA vs. Green Cures Botanical | Merck KGaA vs. Galexxy Holdings | Merck KGaA vs. Indoor Harvest Corp | Merck KGaA vs. Speakeasy Cannabis Club |
| Global Hemp vs. Green Cures Botanical | Global Hemp vs. Galexxy Holdings | Global Hemp vs. Indoor Harvest Corp | Global Hemp vs. Speakeasy Cannabis Club |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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