Correlation Between Merck Tbk and Indofarma Tbk

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

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

Diversification Opportunities for Merck Tbk and Indofarma Tbk

0.0

Correlation Coefficient

Merck Tbk  Indofarma Tbk

Pay attention - limited upside

The 3 months correlation between Merck and Indofarma is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Tbk and Indofarma Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofarma Tbk 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 Indofarma Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofarma Tbk has no effect on the direction of Merck Tbk i.e., Merck Tbk and Indofarma Tbk go up and down completely randomly.

Pair Corralation between Merck Tbk and Indofarma Tbk

If you would invest  12,600  in Indofarma Tbk on November 20, 2024 and sell it today you would earn a total of  0.00  from holding Indofarma Tbk or generate 0.0% return on investment over 90 days.

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

Merck Tbk  vs.  Indofarma Tbk

Merck Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Indofarma Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Merck Tbk and Indofarma Tbk

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

The idea behind Merck Tbk and Indofarma 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 Transaction History module to view history of all your transactions and understand their impact on performance.