Correlation Between Merck and Elevance Health,

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

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

Diversification Opportunities for Merck and Elevance Health,

0.32

Correlation Coefficient

Merck  Elevance Health,

Weak diversification

The 3 months correlation between Merck and Elevance is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Merck Co and Elevance Health, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elevance Health, and Merck 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 Co are associated (or correlated) with Elevance Health,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elevance Health, has no effect on the direction of Merck i.e., Merck and Elevance Health, go up and down completely randomly.

Pair Corralation between Merck and Elevance Health,

Assuming the 90 days trading horizon Merck Co is expected to generate 0.95 times more return on investment than Elevance Health,. However, Merck Co is 1.05 times less risky than Elevance Health,. It trades about 0.04 of its potential returns per unit of risk. Elevance Health, is currently generating about 0.0 per unit of risk. If you would invest  6,286  in Merck Co on October 4, 2024 and sell it today you would earn a total of  1,322  from holding Merck Co or generate 21.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.93%
Values	Daily Returns

Merck Co  vs.  Elevance Health,

Merck

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Merck is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elevance Health,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elevance Health, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Merck and Elevance Health,

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

The idea behind Merck Co and Elevance Health, 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.