Correlation Between Recruit Holdings and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Recruit Holdings 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 Recruit Holdings and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Recruit Holdings Co and Merck KGaA ADR, you can compare the effects of market volatilities on Recruit Holdings 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 Recruit Holdings with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Recruit Holdings and Merck KGaA.
Diversification Opportunities for Recruit Holdings and Merck KGaA
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Recruit and Merck is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Recruit Holdings Co 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 Recruit Holdings 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 Recruit Holdings Co 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 Recruit Holdings i.e., Recruit Holdings and Merck KGaA go up and down completely randomly.
Pair Corralation between Recruit Holdings and Merck KGaA
Assuming the 90 days horizon Recruit Holdings Co is expected to generate 1.79 times more return on investment than Merck KGaA. However, Recruit Holdings is 1.79 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 -0.39 per unit of risk. If you would invest 1,213 in Recruit Holdings Co on August 25, 2024 and sell it today you would earn a total of 24.00 from holding Recruit Holdings Co or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Recruit Holdings Co vs. Merck KGaA ADR
Performance |
| Timeline |
| Recruit Holdings |
| Merck KGaA ADR |
Recruit Holdings and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Recruit Holdings and Merck KGaA
The main advantage of trading using opposite Recruit Holdings and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Recruit Holdings 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.| Recruit Holdings vs. Kelly Services A | Recruit Holdings vs. Ziprecruiter | Recruit Holdings vs. Robert Half International | Recruit Holdings vs. Upwork Inc |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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