Correlation Between Merck and HANSOH PHARMAC

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

By analyzing existing cross correlation between Merck Company and HANSOH PHARMAC HD 00001, you can compare the effects of market volatilities on Merck and HANSOH PHARMAC 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 HANSOH PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and HANSOH PHARMAC.

Diversification Opportunities for Merck and HANSOH PHARMAC

0.41

Correlation Coefficient

Merck  HANSOH PHARMAC

Very weak diversification

The 3 months correlation between Merck and HANSOH is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and HANSOH PHARMAC HD 00001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANSOH PHARMAC HD 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 Company are associated (or correlated) with HANSOH PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANSOH PHARMAC HD has no effect on the direction of Merck i.e., Merck and HANSOH PHARMAC go up and down completely randomly.

Pair Corralation between Merck and HANSOH PHARMAC

Assuming the 90 days horizon Merck Company is expected to generate 0.28 times more return on investment than HANSOH PHARMAC. However, Merck Company is 3.63 times less risky than HANSOH PHARMAC. It trades about 0.17 of its potential returns per unit of risk. HANSOH PHARMAC HD 00001 is currently generating about -0.17 per unit of risk. If you would invest  14,045  in Merck Company on October 10, 2024 and sell it today you would earn a total of  455.00  from holding Merck Company or generate 3.24% return on investment over 90 days.

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

Merck Company  vs.  HANSOH PHARMAC HD 00001

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HANSOH PHARMAC HD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HANSOH PHARMAC HD 00001 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Merck and HANSOH PHARMAC

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

The idea behind Merck Company and HANSOH PHARMAC HD 00001 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.