Correlation Between Merck Tbk and Darya Varia

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

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

Diversification Opportunities for Merck Tbk and Darya Varia

0.81

Correlation Coefficient

Merck Tbk  Darya Varia

Very poor diversification

The 3 months correlation between Merck and Darya is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Tbk and Darya Varia Laboratoria Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darya Varia Laboratoria and Merck Tbk 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 Tbk are associated (or correlated) with Darya Varia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darya Varia Laboratoria has no effect on the direction of Merck Tbk i.e., Merck Tbk and Darya Varia go up and down completely randomly.

Pair Corralation between Merck Tbk and Darya Varia

Assuming the 90 days trading horizon Merck Tbk is expected to generate 0.76 times more return on investment than Darya Varia. However, Merck Tbk is 1.31 times less risky than Darya Varia. It trades about -0.06 of its potential returns per unit of risk. Darya Varia Laboratoria Tbk is currently generating about -0.1 per unit of risk. If you would invest  360,000  in Merck Tbk on December 30, 2024 and sell it today you would lose (19,000) from holding Merck Tbk or give up 5.28% of portfolio value over 90 days.

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

Merck Tbk  vs.  Darya Varia Laboratoria Tbk

Merck Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Merck Tbk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Darya Varia Laboratoria

Risk-Adjusted Performance

Very Weak

Over the last 90 days Darya Varia Laboratoria Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Merck Tbk and Darya Varia

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

The idea behind Merck Tbk and Darya Varia Laboratoria Tbk 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 Global Correlations module to find global opportunities by holding instruments from different markets.