Correlation Between MERCK Kommanditgesells and Takeda Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both MERCK Kommanditgesells and Takeda Pharmaceutical 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 Takeda Pharmaceutical 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 Takeda Pharmaceutical Co, you can compare the effects of market volatilities on MERCK Kommanditgesells and Takeda Pharmaceutical 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 Takeda Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCK Kommanditgesells and Takeda Pharmaceutical.

Diversification Opportunities for MERCK Kommanditgesells and Takeda Pharmaceutical

0.28

Correlation Coefficient

MERCK Kommanditgesells  Takeda Pharmaceutical

Modest diversification

The 3 months correlation between MERCK and Takeda is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MERCK Kommanditgesellschaft au and Takeda Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of MERCK Kommanditgesells i.e., MERCK Kommanditgesells and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between MERCK Kommanditgesells and Takeda Pharmaceutical

Assuming the 90 days horizon MERCK Kommanditgesellschaft auf is expected to generate 2.21 times more return on investment than Takeda Pharmaceutical. However, MERCK Kommanditgesells is 2.21 times more volatile than Takeda Pharmaceutical Co. It trades about 0.01 of its potential returns per unit of risk. Takeda Pharmaceutical Co is currently generating about 0.01 per unit of risk. If you would invest  17,460  in MERCK Kommanditgesellschaft auf on January 25, 2024 and sell it today you would lose (1,409) from holding MERCK Kommanditgesellschaft auf or give up 8.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

MERCK Kommanditgesellschaft au  vs.  Takeda Pharmaceutical Co

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 nearly stable basic indicators, MERCK Kommanditgesells is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with MERCK Kommanditgesells and Takeda Pharmaceutical

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

The idea behind MERCK Kommanditgesellschaft auf and Takeda Pharmaceutical Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.