Correlation Between KENEDIX OFFICE and Merck

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

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

Diversification Opportunities for KENEDIX OFFICE and Merck

0.13

Correlation Coefficient

KENEDIX OFFICE  Merck

Average diversification

The 3 months correlation between KENEDIX and Merck is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding KENEDIX OFFICE INV and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and KENEDIX OFFICE 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 KENEDIX OFFICE INV 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 KENEDIX OFFICE i.e., KENEDIX OFFICE and Merck go up and down completely randomly.

Pair Corralation between KENEDIX OFFICE and Merck

Assuming the 90 days horizon KENEDIX OFFICE INV is expected to generate 2.13 times more return on investment than Merck. However, KENEDIX OFFICE is 2.13 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 0.0 per unit of risk. If you would invest  89,000  in KENEDIX OFFICE INV on October 8, 2024 and sell it today you would earn a total of  1,500  from holding KENEDIX OFFICE INV or generate 1.69% return on investment over 90 days.

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

KENEDIX OFFICE INV  vs.  Merck Company

KENEDIX OFFICE INV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KENEDIX OFFICE INV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KENEDIX OFFICE is not utilizing all of its potentials. The newest 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. 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.

Pair Trading with KENEDIX OFFICE and Merck

The main advantage of trading using opposite KENEDIX OFFICE and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENEDIX OFFICE 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 KENEDIX OFFICE INV 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.