Correlation Between Akamai Technologies, and Merck

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

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

Diversification Opportunities for Akamai Technologies, and Merck

0.55

Correlation Coefficient

Akamai Technologies,  Merck

Very weak diversification

The 3 months correlation between Akamai and Merck is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies, and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck and Akamai Technologies, 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 Akamai Technologies, 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 has no effect on the direction of Akamai Technologies, i.e., Akamai Technologies, and Merck go up and down completely randomly.

Pair Corralation between Akamai Technologies, and Merck

Assuming the 90 days trading horizon Akamai Technologies, is expected to under-perform the Merck. But the stock apears to be less risky and, when comparing its historical volatility, Akamai Technologies, is 5.21 times less risky than Merck. The stock trades about -0.19 of its potential returns per unit of risk. The Merck Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,756  in Merck Co on October 6, 2024 and sell it today you would lose (41.00) from holding Merck Co or give up 0.53% of portfolio value over 90 days.

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

Akamai Technologies,  vs.  Merck Co

Akamai Technologies,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Akamai Technologies, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Akamai Technologies, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Merck

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Merck is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akamai Technologies, and Merck

The main advantage of trading using opposite Akamai Technologies, and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akamai Technologies, 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 Akamai Technologies, and Merck Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.