Correlation Between Merck KGaA and SIVERS SEMICONDUCTORS
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and SIVERS SEMICONDUCTORS AB, you can compare the effects of market volatilities on Merck KGaA and SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and SIVERS SEMICONDUCTORS.
Diversification Opportunities for Merck KGaA and SIVERS SEMICONDUCTORS
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and SIVERS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and SIVERS SEMICONDUCTORS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIVERS SEMICONDUCTORS 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 are associated (or correlated) with SIVERS SEMICONDUCTORS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIVERS SEMICONDUCTORS has no effect on the direction of Merck KGaA i.e., Merck KGaA and SIVERS SEMICONDUCTORS go up and down completely randomly.
Pair Corralation between Merck KGaA and SIVERS SEMICONDUCTORS
Assuming the 90 days trading horizon Merck KGaA is expected to generate 0.25 times more return on investment than SIVERS SEMICONDUCTORS. However, Merck KGaA is 4.02 times less risky than SIVERS SEMICONDUCTORS. It trades about -0.02 of its potential returns per unit of risk. SIVERS SEMICONDUCTORS AB is currently generating about -0.06 per unit of risk. If you would invest 15,195 in Merck KGaA on September 3, 2024 and sell it today you would lose (1,035) from holding Merck KGaA or give up 6.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA vs. SIVERS SEMICONDUCTORS AB
Performance |
| Timeline |
| Merck KGaA |
| SIVERS SEMICONDUCTORS |
Merck KGaA and SIVERS SEMICONDUCTORS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and SIVERS SEMICONDUCTORS
The main advantage of trading using opposite Merck KGaA and SIVERS SEMICONDUCTORS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS will offset losses from the drop in SIVERS SEMICONDUCTORS's long position.| Merck KGaA vs. Gol Intelligent Airlines | Merck KGaA vs. BJs Wholesale Club | Merck KGaA vs. Fast Retailing Co | Merck KGaA vs. JAPAN AIRLINES |
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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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