Correlation Between Merck KGaA and Grey Cloak
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Grey Cloak 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 Grey Cloak 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 Grey Cloak Tech, you can compare the effects of market volatilities on Merck KGaA and Grey Cloak 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 Grey Cloak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Grey Cloak.
Diversification Opportunities for Merck KGaA and Grey Cloak
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Grey is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Grey Cloak Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grey Cloak Tech 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 Grey Cloak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grey Cloak Tech has no effect on the direction of Merck KGaA i.e., Merck KGaA and Grey Cloak go up and down completely randomly.
Pair Corralation between Merck KGaA and Grey Cloak
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Grey Cloak. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 14.99 times less risky than Grey Cloak. The pink sheet trades about -0.36 of its potential returns per unit of risk. The Grey Cloak Tech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 325.00 in Grey Cloak Tech on August 29, 2024 and sell it today you would lose (95.00) from holding Grey Cloak Tech or give up 29.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Grey Cloak Tech
Performance |
| Timeline |
| Merck KGaA ADR |
| Grey Cloak Tech |
Merck KGaA and Grey Cloak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Grey Cloak
The main advantage of trading using opposite Merck KGaA and Grey Cloak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Grey Cloak 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 Grey Cloak will offset losses from the drop in Grey Cloak'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 |
| Grey Cloak vs. ManifestSeven Holdings | Grey Cloak vs. Pure Harvest Cannabis | Grey Cloak vs. Ionic Brands Corp | Grey Cloak vs. CuraScientific Corp |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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