Correlation Between Merck and CSPC PHARMACEUTGR

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

By analyzing existing cross correlation between Merck Co and CSPC PHARMACEUTGR ADR4, you can compare the effects of market volatilities on Merck and CSPC PHARMACEUTGR 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 CSPC PHARMACEUTGR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CSPC PHARMACEUTGR.

Diversification Opportunities for Merck and CSPC PHARMACEUTGR

0.0

Correlation Coefficient

Merck  CSPC PHARMACEUTGR

Pay attention - limited upside

The 3 months correlation between Merck and CSPC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Co and CSPC PHARMACEUTGR ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSPC PHARMACEUTGR ADR4 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 Co are associated (or correlated) with CSPC PHARMACEUTGR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSPC PHARMACEUTGR ADR4 has no effect on the direction of Merck i.e., Merck and CSPC PHARMACEUTGR go up and down completely randomly.

Pair Corralation between Merck and CSPC PHARMACEUTGR

If you would invest (100.00) in CSPC PHARMACEUTGR ADR4 on December 25, 2024 and sell it today you would earn a total of  100.00  from holding CSPC PHARMACEUTGR ADR4 or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Merck Co  vs.  CSPC PHARMACEUTGR ADR4

Merck

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CSPC PHARMACEUTGR ADR4

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSPC PHARMACEUTGR ADR4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CSPC PHARMACEUTGR 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 and CSPC PHARMACEUTGR

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

The idea behind Merck Co and CSPC PHARMACEUTGR ADR4 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.