Correlation Between Merck KGaA and Identiv

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

By analyzing existing cross correlation between Merck KGaA and Identiv, you can compare the effects of market volatilities on Merck KGaA and Identiv 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 Identiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Identiv.

Diversification Opportunities for Merck KGaA and Identiv

-0.83

Correlation Coefficient

Merck KGaA  Identiv

Pay attention - limited upside

The 3 months correlation between Merck and Identiv is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv 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 Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of Merck KGaA i.e., Merck KGaA and Identiv go up and down completely randomly.

Pair Corralation between Merck KGaA and Identiv

Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the Identiv. But the stock apears to be less risky and, when comparing its historical volatility, Merck KGaA is 1.68 times less risky than Identiv. The stock trades about -0.18 of its potential returns per unit of risk. The Identiv is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Identiv on September 3, 2024 and sell it today you would earn a total of  63.00  from holding Identiv or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Merck KGaA  vs.  Identiv

Merck KGaA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck KGaA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Identiv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Identiv are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Identiv reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck KGaA and Identiv

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

The idea behind Merck KGaA and Identiv 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.