Correlation Between Merck and Cannabis Sativa
Can any of the company-specific risk be diversified away by investing in both Merck and Cannabis Sativa 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 Cannabis Sativa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Cannabis Sativa, you can compare the effects of market volatilities on Merck and Cannabis Sativa 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 Cannabis Sativa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Cannabis Sativa.
Diversification Opportunities for Merck and Cannabis Sativa
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Cannabis is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Cannabis Sativa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannabis Sativa 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 Cannabis Sativa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannabis Sativa has no effect on the direction of Merck i.e., Merck and Cannabis Sativa go up and down completely randomly.
Pair Corralation between Merck and Cannabis Sativa
Considering the 90-day investment horizon Merck is expected to generate 287.0 times less return on investment than Cannabis Sativa. But when comparing it to its historical volatility, Merck Company is 12.67 times less risky than Cannabis Sativa. It trades about 0.0 of its potential returns per unit of risk. Cannabis Sativa is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Cannabis Sativa on August 30, 2024 and sell it today you would earn a total of 2.57 from holding Cannabis Sativa or generate 128.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Cannabis Sativa
Performance |
| Timeline |
| Merck Company |
| Cannabis Sativa |
Merck and Cannabis Sativa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Cannabis Sativa
The main advantage of trading using opposite Merck and Cannabis Sativa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Cannabis Sativa 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 Cannabis Sativa will offset losses from the drop in Cannabis Sativa's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Cannabis Sativa vs. eWellness Healthcare Corp | Cannabis Sativa vs. M3 Inc | Cannabis Sativa vs. Medical Cannabis Pay | Cannabis Sativa vs. Cloud DX |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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