Correlation Between Merck KGaA and Cannara Biotech
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Cannara Biotech 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 Cannara Biotech 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 Cannara Biotech, you can compare the effects of market volatilities on Merck KGaA and Cannara Biotech 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 Cannara Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Cannara Biotech.
Diversification Opportunities for Merck KGaA and Cannara Biotech
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and Cannara is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Cannara Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannara Biotech 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 Cannara Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannara Biotech has no effect on the direction of Merck KGaA i.e., Merck KGaA and Cannara Biotech go up and down completely randomly.
Pair Corralation between Merck KGaA and Cannara Biotech
Assuming the 90 days horizon Merck KGaA is expected to generate 6.72 times less return on investment than Cannara Biotech. But when comparing it to its historical volatility, Merck KGaA ADR is 2.09 times less risky than Cannara Biotech. It trades about 0.14 of its potential returns per unit of risk. Cannara Biotech is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Cannara Biotech on November 4, 2024 and sell it today you would earn a total of 21.00 from holding Cannara Biotech or generate 38.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Cannara Biotech
Performance |
| Timeline |
| Merck KGaA ADR |
| Cannara Biotech |
Merck KGaA and Cannara Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Cannara Biotech
The main advantage of trading using opposite Merck KGaA and Cannara Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Cannara Biotech 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 Cannara Biotech will offset losses from the drop in Cannara Biotech'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 |
| Cannara Biotech vs. Benchmark Botanics | Cannara Biotech vs. Speakeasy Cannabis Club | Cannara Biotech vs. City View Green | Cannara Biotech vs. BC Craft Supply |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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