Correlation Between Catalent and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Catalent 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 Catalent and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalent and Merck KGaA ADR, you can compare the effects of market volatilities on Catalent 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 Catalent with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and Merck KGaA.
Diversification Opportunities for Catalent and Merck KGaA
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Catalent and Merck is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Catalent 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 Catalent 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 Catalent 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 Catalent i.e., Catalent and Merck KGaA go up and down completely randomly.
Pair Corralation between Catalent and Merck KGaA
Given the investment horizon of 90 days Catalent is expected to generate 0.26 times more return on investment than Merck KGaA. However, Catalent is 3.83 times less risky than Merck KGaA. It trades about -0.06 of its potential returns per unit of risk. Merck KGaA ADR is currently generating about -0.12 per unit of risk. If you would invest 5,640 in Catalent on January 25, 2024 and sell it today you would lose (37.00) from holding Catalent or give up 0.66% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Catalent vs. Merck KGaA ADR
Performance |
Timeline |
Catalent |
Merck KGaA ADR |
Catalent and Merck KGaA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Catalent and Merck KGaA
The main advantage of trading using opposite Catalent and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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.Catalent vs. IQVIA Holdings | Catalent vs. West Pharmaceutical Services | Catalent vs. Charles River Laboratories | Catalent vs. Bio Rad Laboratories |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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