Correlation Between Merck KGaA and 1933 Industries
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and 1933 Industries 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 1933 Industries 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 1933 Industries, you can compare the effects of market volatilities on Merck KGaA and 1933 Industries 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 1933 Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and 1933 Industries.
Diversification Opportunities for Merck KGaA and 1933 Industries
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and 1933 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and 1933 Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1933 Industries 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 1933 Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1933 Industries has no effect on the direction of Merck KGaA i.e., Merck KGaA and 1933 Industries go up and down completely randomly.
Pair Corralation between Merck KGaA and 1933 Industries
Assuming the 90 days horizon Merck KGaA is expected to generate 15.92 times less return on investment than 1933 Industries. But when comparing it to its historical volatility, Merck KGaA ADR is 9.66 times less risky than 1933 Industries. It trades about 0.07 of its potential returns per unit of risk. 1933 Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.42 in 1933 Industries on October 21, 2024 and sell it today you would earn a total of 0.07 from holding 1933 Industries or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. 1933 Industries
Performance |
| Timeline |
| Merck KGaA ADR |
| 1933 Industries |
Merck KGaA and 1933 Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and 1933 Industries
The main advantage of trading using opposite Merck KGaA and 1933 Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, 1933 Industries 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 1933 Industries will offset losses from the drop in 1933 Industries' 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 |
| 1933 Industries vs. Integrated Cannabis Solutions | 1933 Industries vs. Cannabis Global | 1933 Industries vs. HempAmericana | 1933 Industries vs. Hempfusion Wellness |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |