Correlation Between Merck KGaA and Virtual Medical
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Virtual Medical 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 Virtual Medical 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 Virtual Medical International, you can compare the effects of market volatilities on Merck KGaA and Virtual Medical 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 Virtual Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Virtual Medical.
Diversification Opportunities for Merck KGaA and Virtual Medical
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Virtual is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Virtual Medical International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtual Medical Inte 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 Virtual Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtual Medical Inte has no effect on the direction of Merck KGaA i.e., Merck KGaA and Virtual Medical go up and down completely randomly.
Pair Corralation between Merck KGaA and Virtual Medical
Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Virtual Medical. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 13.93 times less risky than Virtual Medical. The pink sheet trades about -0.36 of its potential returns per unit of risk. The Virtual Medical International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Virtual Medical International on August 29, 2024 and sell it today you would earn a total of 0.01 from holding Virtual Medical International or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. Virtual Medical International
Performance |
| Timeline |
| Merck KGaA ADR |
| Virtual Medical Inte |
Merck KGaA and Virtual Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Virtual Medical
The main advantage of trading using opposite Merck KGaA and Virtual Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Virtual Medical 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 Virtual Medical will offset losses from the drop in Virtual Medical'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 |
| Virtual Medical vs. Galexxy Holdings | Virtual Medical vs. GelStat Corp | Virtual Medical vs. Link Reservations | Virtual Medical vs. Anything Tech Media |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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