Correlation Between Mc Endvrs and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Mc Endvrs and Merck KGaA 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 Mc Endvrs and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mc Endvrs and Merck KGaA ADR, you can compare the effects of market volatilities on Mc Endvrs and Merck KGaA 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 Mc Endvrs with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mc Endvrs and Merck KGaA.
Diversification Opportunities for Mc Endvrs and Merck KGaA
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MSMY and Merck is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mc Endvrs and Merck KGaA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA ADR and Mc Endvrs 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 Mc Endvrs are associated (or correlated) with Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA ADR has no effect on the direction of Mc Endvrs i.e., Mc Endvrs and Merck KGaA go up and down completely randomly.
Pair Corralation between Mc Endvrs and Merck KGaA
Given the investment horizon of 90 days Mc Endvrs is expected to generate 7.56 times more return on investment than Merck KGaA. However, Mc Endvrs is 7.56 times more volatile than Merck KGaA ADR. It trades about 0.05 of its potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.36 per unit of risk. If you would invest 0.07 in Mc Endvrs on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Mc Endvrs or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mc Endvrs vs. Merck KGaA ADR
Performance |
| Timeline |
| Mc Endvrs |
| Merck KGaA ADR |
Mc Endvrs and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mc Endvrs and Merck KGaA
The main advantage of trading using opposite Mc Endvrs and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mc Endvrs position performs unexpectedly, Merck KGaA 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 Merck KGaA will offset losses from the drop in Merck KGaA's long position.The idea behind Mc Endvrs and Merck KGaA 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.| Merck KGaA vs. Recruit Holdings Co | Merck KGaA vs. Fresenius SE Co | Merck KGaA vs. Straumann Holding AG | Merck KGaA vs. MERCK Kommanditgesellschaft auf |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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