Correlation Between Merck KGaA and Kaya Holdings
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Kaya Holdings 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 Kaya Holdings 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 Kaya Holdings, you can compare the effects of market volatilities on Merck KGaA and Kaya Holdings 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 Kaya Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Kaya Holdings.
Diversification Opportunities for Merck KGaA and Kaya Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Kaya is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Kaya Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaya Holdings 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 Kaya Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaya Holdings has no effect on the direction of Merck KGaA i.e., Merck KGaA and Kaya Holdings go up and down completely randomly.
Pair Corralation between Merck KGaA and Kaya Holdings
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Kaya Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 5.66 times less risky than Kaya Holdings. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Kaya Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.42 in Kaya Holdings on September 2, 2024 and sell it today you would lose (2.62) from holding Kaya Holdings or give up 40.81% 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. Kaya Holdings
Performance |
| Timeline |
| Merck KGaA ADR |
| Kaya Holdings |
Merck KGaA and Kaya Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Kaya Holdings
The main advantage of trading using opposite Merck KGaA and Kaya Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Kaya Holdings 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 Kaya Holdings will offset losses from the drop in Kaya Holdings' long position.| Merck KGaA vs. Holloman Energy Corp | Merck KGaA vs. cbdMD Inc | Merck KGaA vs. Evolus Inc | Merck KGaA vs. CV Sciences |
| Kaya Holdings vs. MPX International Corp | Kaya Holdings vs. Grown Rogue International | Kaya Holdings vs. Slang Worldwide | Kaya Holdings vs. Decibel Cannabis |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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