Correlation Between Merck KGaA and ANI Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and ANI Pharmaceuticals 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 ANI Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and ANI Pharmaceuticals, you can compare the effects of market volatilities on Merck KGaA and ANI Pharmaceuticals 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 ANI Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and ANI Pharmaceuticals.
Diversification Opportunities for Merck KGaA and ANI Pharmaceuticals
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and ANI is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and ANI Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANI Pharmaceuticals 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 ANI Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANI Pharmaceuticals has no effect on the direction of Merck KGaA i.e., Merck KGaA and ANI Pharmaceuticals go up and down completely randomly.
Pair Corralation between Merck KGaA and ANI Pharmaceuticals
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the ANI Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Merck KGaA is 1.42 times less risky than ANI Pharmaceuticals. The stock trades about -0.01 of its potential returns per unit of risk. The ANI Pharmaceuticals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5,400 in ANI Pharmaceuticals on September 4, 2024 and sell it today you would earn a total of 0.00 from holding ANI Pharmaceuticals or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA vs. ANI Pharmaceuticals
Performance |
| Timeline |
| Merck KGaA |
| ANI Pharmaceuticals |
Merck KGaA and ANI Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and ANI Pharmaceuticals
The main advantage of trading using opposite Merck KGaA and ANI Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, ANI Pharmaceuticals 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 ANI Pharmaceuticals will offset losses from the drop in ANI Pharmaceuticals' long position.| Merck KGaA vs. Superior Plus Corp | Merck KGaA vs. NMI Holdings | Merck KGaA vs. Origin Agritech | Merck KGaA vs. SIVERS SEMICONDUCTORS AB |
| ANI Pharmaceuticals vs. Merck KGaA | ANI Pharmaceuticals vs. Superior Plus Corp | ANI Pharmaceuticals vs. NMI Holdings | ANI Pharmaceuticals vs. Origin Agritech |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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