Correlation Between Merck KGaA and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Fast Retailing 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 Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and Fast Retailing Co, you can compare the effects of market volatilities on Merck KGaA and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Fast Retailing.
Diversification Opportunities for Merck KGaA and Fast Retailing
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Fast is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Merck KGaA i.e., Merck KGaA and Fast Retailing go up and down completely randomly.
Pair Corralation between Merck KGaA and Fast Retailing
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Merck KGaA is 1.35 times less risky than Fast Retailing. The stock trades about -0.28 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 29,770 in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of 2,060 from holding Fast Retailing Co or generate 6.92% 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. Fast Retailing Co
Performance |
| Timeline |
| Merck KGaA |
| Fast Retailing |
Merck KGaA and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Fast Retailing
The main advantage of trading using opposite Merck KGaA and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing'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 |
| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |