Correlation Between Merck and AmerisourceBergen

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

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

Diversification Opportunities for Merck and AmerisourceBergen

-0.94

Correlation Coefficient

Merck  AmerisourceBergen

Pay attention - limited upside

The 3 months correlation between Merck and AmerisourceBergen is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen 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 AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of Merck i.e., Merck and AmerisourceBergen go up and down completely randomly.

Pair Corralation between Merck and AmerisourceBergen

If you would invest  19,145  in AmerisourceBergen on September 3, 2024 and sell it today you would earn a total of  0.00  from holding AmerisourceBergen or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Merck Company  vs.  AmerisourceBergen

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 unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmerisourceBergen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, AmerisourceBergen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merck and AmerisourceBergen

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

The idea behind Merck Company and AmerisourceBergen 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.