Correlation Between LIVZON PHARMAC and Merck KGaA

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

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

Diversification Opportunities for LIVZON PHARMAC and Merck KGaA

0.1

Correlation Coefficient

LIVZON PHARMAC  Merck KGaA

Average diversification

The 3 months correlation between LIVZON and Merck is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LIVZON PHARMAC GRP and Merck KGaA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA and LIVZON PHARMAC 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 LIVZON PHARMAC GRP 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 LIVZON PHARMAC i.e., LIVZON PHARMAC and Merck KGaA go up and down completely randomly.

Pair Corralation between LIVZON PHARMAC and Merck KGaA

Assuming the 90 days horizon LIVZON PHARMAC GRP is expected to under-perform the Merck KGaA. In addition to that, LIVZON PHARMAC is 2.04 times more volatile than Merck KGaA. It trades about -0.05 of its total potential returns per unit of risk. Merck KGaA is currently generating about 0.09 per unit of volatility. If you would invest  14,070  in Merck KGaA on October 15, 2024 and sell it today you would earn a total of  185.00  from holding Merck KGaA or generate 1.31% return on investment over 90 days.

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

LIVZON PHARMAC GRP  vs.  Merck KGaA

LIVZON PHARMAC GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIVZON PHARMAC GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LIVZON PHARMAC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest fragile performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with LIVZON PHARMAC and Merck KGaA

The main advantage of trading using opposite LIVZON PHARMAC and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIVZON PHARMAC 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 LIVZON PHARMAC GRP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.