Correlation Between Aegean Airlines and Merck

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

By analyzing existing cross correlation between Aegean Airlines SA and Merck Company, you can compare the effects of market volatilities on Aegean Airlines and Merck 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 Aegean Airlines with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aegean Airlines and Merck.

Diversification Opportunities for Aegean Airlines and Merck

0.83

Correlation Coefficient

Aegean Airlines  Merck

Very poor diversification

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

Pair Corralation between Aegean Airlines and Merck

Assuming the 90 days horizon Aegean Airlines SA is expected to generate 1.0 times more return on investment than Merck. However, Aegean Airlines is 1.0 times more volatile than Merck Company. It trades about -0.06 of its potential returns per unit of risk. Merck Company is currently generating about -0.15 per unit of risk. If you would invest  1,065  in Aegean Airlines SA on September 15, 2024 and sell it today you would lose (74.00) from holding Aegean Airlines SA or give up 6.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.48%
Values	Daily Returns

Aegean Airlines SA  vs.  Merck Company

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aegean Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aegean Airlines and Merck

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

The idea behind Aegean Airlines SA and Merck Company 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.