Correlation Between MERCK Kommanditgesells and Captiva Verde

Can any of the company-specific risk be diversified away by investing in both MERCK Kommanditgesells and Captiva Verde 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 MERCK Kommanditgesells and Captiva Verde into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MERCK Kommanditgesellschaft auf and Captiva Verde Land, you can compare the effects of market volatilities on MERCK Kommanditgesells and Captiva Verde 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 MERCK Kommanditgesells with a short position of Captiva Verde. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCK Kommanditgesells and Captiva Verde.

Diversification Opportunities for MERCK Kommanditgesells and Captiva Verde

0.62

Correlation Coefficient

MERCK Kommanditgesells  Captiva Verde

Poor diversification

The 3 months correlation between MERCK and Captiva is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MERCK Kommanditgesellschaft au and Captiva Verde Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Captiva Verde Land and MERCK Kommanditgesells 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 MERCK Kommanditgesellschaft auf are associated (or correlated) with Captiva Verde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Captiva Verde Land has no effect on the direction of MERCK Kommanditgesells i.e., MERCK Kommanditgesells and Captiva Verde go up and down completely randomly.

Pair Corralation between MERCK Kommanditgesells and Captiva Verde

Assuming the 90 days horizon MERCK Kommanditgesells is expected to generate 288.73 times less return on investment than Captiva Verde. But when comparing it to its historical volatility, MERCK Kommanditgesellschaft auf is 26.02 times less risky than Captiva Verde. It trades about 0.02 of its potential returns per unit of risk. Captiva Verde Land is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Captiva Verde Land on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Captiva Verde Land or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

MERCK Kommanditgesellschaft au  vs.  Captiva Verde Land

MERCK Kommanditgesells

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MERCK Kommanditgesellschaft auf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Captiva Verde Land

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Captiva Verde Land are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Captiva Verde reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MERCK Kommanditgesells and Captiva Verde

The main advantage of trading using opposite MERCK Kommanditgesells and Captiva Verde positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCK Kommanditgesells position performs unexpectedly, Captiva Verde 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 Captiva Verde will offset losses from the drop in Captiva Verde's long position.

The idea behind MERCK Kommanditgesellschaft auf and Captiva Verde Land 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.