Correlation Between Merck KGaA and Guangzhou Baiyunshan
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Guangzhou Baiyunshan 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 Guangzhou Baiyunshan 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 Guangzhou Baiyunshan Pharmaceutical, you can compare the effects of market volatilities on Merck KGaA and Guangzhou Baiyunshan 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 Guangzhou Baiyunshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Guangzhou Baiyunshan.
Diversification Opportunities for Merck KGaA and Guangzhou Baiyunshan
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Guangzhou is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan 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 Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of Merck KGaA i.e., Merck KGaA and Guangzhou Baiyunshan go up and down completely randomly.
Pair Corralation between Merck KGaA and Guangzhou Baiyunshan
If you would invest 288.00 in Guangzhou Baiyunshan Pharmaceutical on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Guangzhou Baiyunshan Pharmaceutical or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Merck KGaA ADR vs. Guangzhou Baiyunshan Pharmaceu
Performance |
| Timeline |
| Merck KGaA ADR |
| Guangzhou Baiyunshan |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck KGaA and Guangzhou Baiyunshan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Guangzhou Baiyunshan
The main advantage of trading using opposite Merck KGaA and Guangzhou Baiyunshan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Guangzhou Baiyunshan 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 Guangzhou Baiyunshan will offset losses from the drop in Guangzhou Baiyunshan'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 |
| Guangzhou Baiyunshan vs. Catalent | Guangzhou Baiyunshan vs. Zoetis Inc | Guangzhou Baiyunshan vs. ANI Pharmaceuticals | Guangzhou Baiyunshan 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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