Correlation Between AmeraMex International and Merck

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

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

Diversification Opportunities for AmeraMex International and Merck

0.1

Correlation Coefficient

AmeraMex International  Merck

Average diversification

The 3 months correlation between AmeraMex and Merck is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AmeraMex International and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and AmeraMex International 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 AmeraMex International 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 AmeraMex International i.e., AmeraMex International and Merck go up and down completely randomly.

Pair Corralation between AmeraMex International and Merck

Given the investment horizon of 90 days AmeraMex International is expected to under-perform the Merck. In addition to that, AmeraMex International is 5.42 times more volatile than Merck Company. It trades about -0.08 of its total potential returns per unit of risk. Merck Company is currently generating about -0.13 per unit of volatility. If you would invest  9,577  in Merck Company on November 19, 2024 and sell it today you would lose (1,276) from holding Merck Company or give up 13.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

AmeraMex International  vs.  Merck Company

AmeraMex International

Risk-Adjusted Performance

Very Weak

Over the last 90 days AmeraMex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with AmeraMex International and Merck

The main advantage of trading using opposite AmeraMex International and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmeraMex International 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 AmeraMex International 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.