Correlation Between Merck KGaA and LIVZON PHARMAC
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and LIVZON PHARMAC 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 KGaA and LIVZON PHARMAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and LIVZON PHARMAC GRP, you can compare the effects of market volatilities on Merck KGaA and LIVZON PHARMAC 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 KGaA with a short position of LIVZON PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and LIVZON PHARMAC.
Diversification Opportunities for Merck KGaA and LIVZON PHARMAC
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merck and LIVZON is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and LIVZON PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIVZON PHARMAC GRP and Merck KGaA 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 KGaA are associated (or correlated) with LIVZON PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIVZON PHARMAC GRP has no effect on the direction of Merck KGaA i.e., Merck KGaA and LIVZON PHARMAC go up and down completely randomly.
Pair Corralation between Merck KGaA and LIVZON PHARMAC
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the LIVZON PHARMAC. But the stock apears to be less risky and, when comparing its historical volatility, Merck KGaA is 5.52 times less risky than LIVZON PHARMAC. The stock trades about -0.06 of its potential returns per unit of risk. The LIVZON PHARMAC GRP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 147.00 in LIVZON PHARMAC GRP on September 26, 2024 and sell it today you would earn a total of 193.00 from holding LIVZON PHARMAC GRP or generate 131.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Merck KGaA vs. LIVZON PHARMAC GRP
Performance |
Timeline |
Merck KGaA |
LIVZON PHARMAC GRP |
Merck KGaA and LIVZON PHARMAC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck KGaA and LIVZON PHARMAC
The main advantage of trading using opposite Merck KGaA and LIVZON PHARMAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, LIVZON PHARMAC 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 LIVZON PHARMAC will offset losses from the drop in LIVZON PHARMAC's long position.Merck KGaA vs. Haleon PLC | Merck KGaA vs. LIVZON PHARMAC GRP | Merck KGaA vs. SIMCERE PHARMAC GRP | Merck KGaA vs. CanSino Biologics |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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