Correlation Between Merck and Warimpex Finanz

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

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

Diversification Opportunities for Merck and Warimpex Finanz

0.42

Correlation Coefficient

Merck  Warimpex Finanz

Very weak diversification

The 3 months correlation between Merck and Warimpex is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Warimpex Finanz und in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warimpex Finanz und 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 Warimpex Finanz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warimpex Finanz und has no effect on the direction of Merck i.e., Merck and Warimpex Finanz go up and down completely randomly.

Pair Corralation between Merck and Warimpex Finanz

Assuming the 90 days trading horizon Merck Company is expected to under-perform the Warimpex Finanz. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 3.89 times less risky than Warimpex Finanz. The stock trades about -0.01 of its potential returns per unit of risk. The Warimpex Finanz und is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  66.00  in Warimpex Finanz und on October 21, 2024 and sell it today you would earn a total of  1.00  from holding Warimpex Finanz und or generate 1.52% 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.  Warimpex Finanz und

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 fairly strong forward-looking signals, Merck is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Warimpex Finanz und

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warimpex Finanz und are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical and fundamental indicators, Warimpex Finanz may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Merck and Warimpex Finanz

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

The idea behind Merck Company and Warimpex Finanz und 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.