Correlation Between Merck and Kamada

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Can any of the company-specific risk be diversified away by investing in both Merck and Kamada 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 and Kamada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Kamada, you can compare the effects of market volatilities on Merck and Kamada 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 with a short position of Kamada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Kamada.

Diversification Opportunities for Merck and Kamada

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Merck and Kamada is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Kamada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamada and Merck 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 Company are associated (or correlated) with Kamada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamada has no effect on the direction of Merck i.e., Merck and Kamada go up and down completely randomly.

Pair Corralation between Merck and Kamada

Considering the 90-day investment horizon Merck Company is expected to under-perform the Kamada. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 3.06 times less risky than Kamada. The stock trades about -0.05 of its potential returns per unit of risk. The Kamada is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  469.00  in Kamada on November 2, 2022 and sell it today you would lose (9.52)  from holding Kamada or give up 2.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  Kamada

 Performance (%) 
       Timeline  
Merck Company 
Merck Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in March 2023.

Merck Price Channel

Kamada 
Kamada Performance
0 of 100
Over the last 90 days Kamada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Kamada is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kamada Price Channel

Merck and Kamada Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Kamada

The main advantage of trading using opposite Merck and Kamada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Kamada 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 Kamada will offset losses from the drop in Kamada's long position.
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The idea behind Merck Company and Kamada 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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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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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