Correlation Between Merck and XTL Biopharmaceutica
Can any of the company-specific risk be diversified away by investing in both Merck and XTL Biopharmaceutica 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 XTL Biopharmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and XTL Biopharmaceuticals Ltd, you can compare the effects of market volatilities on Merck and XTL Biopharmaceutica 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 XTL Biopharmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and XTL Biopharmaceutica.
Diversification Opportunities for Merck and XTL Biopharmaceutica
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and XTL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and XTL Biopharmaceuticals Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTL Biopharmaceuticals 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 XTL Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTL Biopharmaceuticals has no effect on the direction of Merck i.e., Merck and XTL Biopharmaceutica go up and down completely randomly.
Pair Corralation between Merck and XTL Biopharmaceutica
Considering the 90-day investment horizon Merck Company is expected to under-perform the XTL Biopharmaceutica. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 6.66 times less risky than XTL Biopharmaceutica. The stock trades about -0.02 of its potential returns per unit of risk. The XTL Biopharmaceuticals Ltd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 83.00 in XTL Biopharmaceuticals Ltd on November 28, 2024 and sell it today you would earn a total of 59.00 from holding XTL Biopharmaceuticals Ltd or generate 71.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.39% |
| Values | Daily Returns |
Merck Company vs. XTL Biopharmaceuticals Ltd
Performance |
| Timeline |
| Merck Company |
| XTL Biopharmaceuticals |
Merck and XTL Biopharmaceutica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and XTL Biopharmaceutica
The main advantage of trading using opposite Merck and XTL Biopharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, XTL Biopharmaceutica 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 XTL Biopharmaceutica will offset losses from the drop in XTL Biopharmaceutica's long position.The idea behind Merck Company and XTL Biopharmaceuticals Ltd 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.| XTL Biopharmaceutica vs. Benitec Biopharma Ltd | XTL Biopharmaceutica vs. Xenetic Biosciences | XTL Biopharmaceutica vs. ProPhase Labs | XTL Biopharmaceutica vs. BOS Better Online |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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