Correlation Between Merck KGaA and SLR Investment
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and SLR Investment 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 SLR Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and SLR Investment Corp, you can compare the effects of market volatilities on Merck KGaA and SLR Investment 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 SLR Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and SLR Investment.
Diversification Opportunities for Merck KGaA and SLR Investment
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and SLR is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Merck KGaA i.e., Merck KGaA and SLR Investment go up and down completely randomly.
Pair Corralation between Merck KGaA and SLR Investment
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the SLR Investment. In addition to that, Merck KGaA is 1.11 times more volatile than SLR Investment Corp. It trades about -0.12 of its total potential returns per unit of risk. SLR Investment Corp is currently generating about 0.23 per unit of volatility. If you would invest 1,371 in SLR Investment Corp on September 13, 2024 and sell it today you would earn a total of 215.00 from holding SLR Investment Corp or generate 15.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Merck KGaA vs. SLR Investment Corp
Performance |
| Timeline |
| Merck KGaA |
| SLR Investment Corp |
Merck KGaA and SLR Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and SLR Investment
The main advantage of trading using opposite Merck KGaA and SLR Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, SLR Investment 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 SLR Investment will offset losses from the drop in SLR Investment's long position.| Merck KGaA vs. SLR Investment Corp | Merck KGaA vs. THAI BEVERAGE | Merck KGaA vs. Gladstone Investment | Merck KGaA vs. Apollo Investment Corp |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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