Correlation Between Edesa Holding and Merck

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

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

Diversification Opportunities for Edesa Holding and Merck

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Correlation Coefficient

Edesa Holding  Merck

Pay attention - limited upside

The 3 months correlation between Edesa and Merck is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Edesa Holding SA and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Edesa Holding 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 Edesa Holding 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 Edesa Holding i.e., Edesa Holding and Merck go up and down completely randomly.

Pair Corralation between Edesa Holding and Merck

Assuming the 90 days trading horizon Edesa Holding is expected to generate 1.09 times less return on investment than Merck. But when comparing it to its historical volatility, Edesa Holding SA is 1.37 times less risky than Merck. It trades about 0.12 of its potential returns per unit of risk. Merck Company is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  746,753  in Merck Company on September 14, 2024 and sell it today you would earn a total of  1,418,247  from holding Merck Company or generate 189.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Edesa Holding SA  vs.  Merck Company

Edesa Holding SA

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Edesa Holding SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Edesa Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Despite weak performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Edesa Holding and Merck

The main advantage of trading using opposite Edesa Holding and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edesa Holding 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 Edesa Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.