Correlation Between ANI Pharmaceuticals and Merck KGaA

Can any of the company-specific risk be diversified away by investing in both ANI Pharmaceuticals 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 ANI Pharmaceuticals and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ANI Pharmaceuticals and Merck KGaA, you can compare the effects of market volatilities on ANI Pharmaceuticals 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 ANI Pharmaceuticals with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANI Pharmaceuticals and Merck KGaA.

Diversification Opportunities for ANI Pharmaceuticals and Merck KGaA

-0.03

Correlation Coefficient

ANI Pharmaceuticals  Merck KGaA

Good diversification

The 3 months correlation between ANI and Merck is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ANI Pharmaceuticals and Merck KGaA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA and ANI Pharmaceuticals 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 ANI Pharmaceuticals 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 has no effect on the direction of ANI Pharmaceuticals i.e., ANI Pharmaceuticals and Merck KGaA go up and down completely randomly.

Pair Corralation between ANI Pharmaceuticals and Merck KGaA

Assuming the 90 days trading horizon ANI Pharmaceuticals is expected to generate 1.57 times more return on investment than Merck KGaA. However, ANI Pharmaceuticals is 1.57 times more volatile than Merck KGaA. It trades about 0.03 of its potential returns per unit of risk. Merck KGaA is currently generating about -0.02 per unit of risk. If you would invest  4,040  in ANI Pharmaceuticals on September 26, 2024 and sell it today you would earn a total of  1,060  from holding ANI Pharmaceuticals or generate 26.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ANI Pharmaceuticals  vs.  Merck KGaA

ANI Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANI Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ANI Pharmaceuticals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Merck KGaA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck KGaA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ANI Pharmaceuticals and Merck KGaA

The main advantage of trading using opposite ANI Pharmaceuticals and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANI Pharmaceuticals 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 ANI Pharmaceuticals and Merck KGaA 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.