Correlation Between Virtual Medical and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Virtual Medical 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 Virtual Medical and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virtual Medical International and Merck KGaA ADR, you can compare the effects of market volatilities on Virtual Medical 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 Virtual Medical with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtual Medical and Merck KGaA.
Diversification Opportunities for Virtual Medical and Merck KGaA
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Virtual and Merck is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Virtual Medical International 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 Virtual Medical 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 Virtual Medical International 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 Virtual Medical i.e., Virtual Medical and Merck KGaA go up and down completely randomly.
Pair Corralation between Virtual Medical and Merck KGaA
Given the investment horizon of 90 days Virtual Medical International is expected to generate 5.17 times more return on investment than Merck KGaA. However, Virtual Medical is 5.17 times more volatile than Merck KGaA ADR. It trades about 0.03 of its potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.02 per unit of risk. If you would invest 0.02 in Virtual Medical International on September 3, 2024 and sell it today you would earn a total of 0.00 from holding Virtual Medical International or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Virtual Medical International vs. Merck KGaA ADR
Performance |
| Timeline |
| Virtual Medical Inte |
| Merck KGaA ADR |
Virtual Medical and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virtual Medical and Merck KGaA
The main advantage of trading using opposite Virtual Medical and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtual Medical 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.| Virtual Medical vs. Green Cures Botanical | Virtual Medical vs. Cann American Corp | Virtual Medical vs. Galexxy Holdings | Virtual Medical vs. Indoor Harvest Corp |
| Merck KGaA vs. Green Cures Botanical | Merck KGaA vs. Cann American Corp | Merck KGaA vs. Galexxy Holdings | Merck KGaA vs. Indoor Harvest Corp |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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