Correlation Between Merck Tbk and Phapros Tbk

Can any of the company-specific risk be diversified away by investing in both Merck Tbk and Phapros 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 Phapros 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 Phapros Tbk PT, you can compare the effects of market volatilities on Merck Tbk and Phapros 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 Phapros Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck Tbk and Phapros Tbk.

Diversification Opportunities for Merck Tbk and Phapros Tbk

0.75

Correlation Coefficient

Merck Tbk  Phapros Tbk

Poor diversification

The 3 months correlation between Merck and Phapros is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merck Tbk and Phapros Tbk PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phapros Tbk PT 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 Phapros Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phapros Tbk PT has no effect on the direction of Merck Tbk i.e., Merck Tbk and Phapros Tbk go up and down completely randomly.

Pair Corralation between Merck Tbk and Phapros Tbk

Assuming the 90 days trading horizon Merck Tbk is expected to generate 0.68 times more return on investment than Phapros Tbk. However, Merck Tbk is 1.47 times less risky than Phapros Tbk. It trades about -0.06 of its potential returns per unit of risk. Phapros Tbk PT is currently generating about -0.07 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	Significant
Accuracy	100.0%
Values	Daily Returns

Merck Tbk  vs.  Phapros Tbk PT

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.

Phapros Tbk PT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phapros Tbk PT 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 Phapros Tbk

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

The idea behind Merck Tbk and Phapros Tbk PT 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.