Correlation Between Merck and Beiersdorf
Can any of the company-specific risk be diversified away by investing in both Merck and Beiersdorf 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 and Beiersdorf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Beiersdorf AG ADR, you can compare the effects of market volatilities on Merck and Beiersdorf 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 with a short position of Beiersdorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Beiersdorf.
Diversification Opportunities for Merck and Beiersdorf
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Beiersdorf is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Beiersdorf AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beiersdorf AG ADR and Merck 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 Company are associated (or correlated) with Beiersdorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beiersdorf AG ADR has no effect on the direction of Merck i.e., Merck and Beiersdorf go up and down completely randomly.
Pair Corralation between Merck and Beiersdorf
Considering the 90-day investment horizon Merck Company is expected to under-perform the Beiersdorf. In addition to that, Merck is 1.16 times more volatile than Beiersdorf AG ADR. It trades about -0.11 of its total potential returns per unit of risk. Beiersdorf AG ADR is currently generating about -0.12 per unit of volatility. If you would invest 3,149 in Beiersdorf AG ADR on August 31, 2024 and sell it today you would lose (568.00) from holding Beiersdorf AG ADR or give up 18.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Beiersdorf AG ADR
Performance |
| Timeline |
| Merck Company |
| Beiersdorf AG ADR |
Merck and Beiersdorf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Beiersdorf
The main advantage of trading using opposite Merck and Beiersdorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Beiersdorf 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 Beiersdorf will offset losses from the drop in Beiersdorf's long position.The idea behind Merck Company and Beiersdorf AG ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Beiersdorf vs. European Wax Center | Beiersdorf vs. Edgewell Personal Care | Beiersdorf vs. Inter Parfums | Beiersdorf vs. Mannatech Incorporated |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |