Correlation Between Merck KGaA and Partners

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

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

Diversification Opportunities for Merck KGaA and Partners

-0.16

Correlation Coefficient

Merck KGaA  Partners

Good diversification

The 3 months correlation between Merck and Partners is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA ADR and Partners Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partners Group 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 ADR are associated (or correlated) with Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partners Group has no effect on the direction of Merck KGaA i.e., Merck KGaA and Partners go up and down completely randomly.

Pair Corralation between Merck KGaA and Partners

Assuming the 90 days horizon Merck KGaA ADR is expected to under-perform the Partners. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merck KGaA ADR is 1.22 times less risky than Partners. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Partners Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  135,800  in Partners Group on May 3, 2025 and sell it today you would earn a total of  2,246  from holding Partners Group or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Merck KGaA ADR  vs.  Partners Group

Merck KGaA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck KGaA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Partners Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Partners Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Merck KGaA and Partners

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

The idea behind Merck KGaA ADR and Partners Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.