Correlation Between Merck KGaA and Casio Computer
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Casio Computer 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 Casio Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and Casio Computer CoLtd, you can compare the effects of market volatilities on Merck KGaA and Casio Computer 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 Casio Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Casio Computer.
Diversification Opportunities for Merck KGaA and Casio Computer
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Casio is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd 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 Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of Merck KGaA i.e., Merck KGaA and Casio Computer go up and down completely randomly.
Pair Corralation between Merck KGaA and Casio Computer
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the Casio Computer. In addition to that, Merck KGaA is 1.06 times more volatile than Casio Computer CoLtd. It trades about -0.05 of its total potential returns per unit of risk. Casio Computer CoLtd is currently generating about 0.08 per unit of volatility. If you would invest 701.00 in Casio Computer CoLtd on November 3, 2024 and sell it today you would earn a total of 97.00 from holding Casio Computer CoLtd or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA vs. Casio Computer CoLtd
Performance |
| Timeline |
| Merck KGaA |
| Casio Computer CoLtd |
Merck KGaA and Casio Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Casio Computer
The main advantage of trading using opposite Merck KGaA and Casio Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Casio Computer 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 Casio Computer will offset losses from the drop in Casio Computer's long position.| Merck KGaA vs. UNITED RENTALS | Merck KGaA vs. New China Life | Merck KGaA vs. Vienna Insurance Group | Merck KGaA vs. SBI Insurance Group |
| Casio Computer vs. Yuexiu Transport Infrastructure | Casio Computer vs. Medical Properties Trust | Casio Computer vs. Aluminum of | Casio Computer vs. Merit Medical Systems |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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