Correlation Between MERCK Kommanditgesells and Entourage Health

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

By analyzing existing cross correlation between MERCK Kommanditgesellschaft auf and Entourage Health Corp, you can compare the effects of market volatilities on MERCK Kommanditgesells and Entourage Health 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 Kommanditgesells with a short position of Entourage Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCK Kommanditgesells and Entourage Health.

Diversification Opportunities for MERCK Kommanditgesells and Entourage Health

0.18

Correlation Coefficient

MERCK Kommanditgesells  Entourage Health

Average diversification

The 3 months correlation between MERCK and Entourage is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding MERCK Kommanditgesellschaft au and Entourage Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entourage Health Corp and MERCK Kommanditgesells 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 Kommanditgesellschaft auf are associated (or correlated) with Entourage Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entourage Health Corp has no effect on the direction of MERCK Kommanditgesells i.e., MERCK Kommanditgesells and Entourage Health go up and down completely randomly.

Pair Corralation between MERCK Kommanditgesells and Entourage Health

Assuming the 90 days horizon MERCK Kommanditgesells is expected to generate 3.54 times less return on investment than Entourage Health. But when comparing it to its historical volatility, MERCK Kommanditgesellschaft auf is 5.19 times less risky than Entourage Health. It trades about 0.01 of its potential returns per unit of risk. Entourage Health Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.45  in Entourage Health Corp on December 2, 2024 and sell it today you would lose (0.15) from holding Entourage Health Corp or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

MERCK Kommanditgesellschaft au  vs.  Entourage Health Corp

MERCK Kommanditgesells

Risk-Adjusted Performance

Very Weak

Over the last 90 days MERCK Kommanditgesellschaft auf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MERCK Kommanditgesells is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Entourage Health Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entourage Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MERCK Kommanditgesells and Entourage Health

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

The idea behind MERCK Kommanditgesellschaft auf and Entourage Health Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.