Correlation Between Merck KGaA and TransGlobal Assets
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and TransGlobal Assets 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 TransGlobal Assets 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 TransGlobal Assets, you can compare the effects of market volatilities on Merck KGaA and TransGlobal Assets 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 TransGlobal Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and TransGlobal Assets.
Diversification Opportunities for Merck KGaA and TransGlobal Assets
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and TransGlobal is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and TransGlobal Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransGlobal Assets 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 TransGlobal Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransGlobal Assets has no effect on the direction of Merck KGaA i.e., Merck KGaA and TransGlobal Assets go up and down completely randomly.
Pair Corralation between Merck KGaA and TransGlobal Assets
Assuming the 90 days horizon Merck KGaA ADR is expected to generate 0.1 times more return on investment than TransGlobal Assets. However, Merck KGaA ADR is 9.78 times less risky than TransGlobal Assets. It trades about -0.36 of its potential returns per unit of risk. TransGlobal Assets is currently generating about -0.05 per unit of risk. If you would invest 3,364 in Merck KGaA ADR on August 28, 2024 and sell it today you would lose (394.00) from holding Merck KGaA ADR or give up 11.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA ADR vs. TransGlobal Assets
Performance |
| Timeline |
| Merck KGaA ADR |
| TransGlobal Assets |
Merck KGaA and TransGlobal Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and TransGlobal Assets
The main advantage of trading using opposite Merck KGaA and TransGlobal Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, TransGlobal Assets 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 TransGlobal Assets will offset losses from the drop in TransGlobal Assets' 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 |
| TransGlobal Assets vs. Greater Cannabis | TransGlobal Assets vs. Galexxy Holdings | TransGlobal Assets vs. GelStat Corp | TransGlobal Assets vs. Golden Developing Solutions |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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