Correlation Between Merck and Ambase Corp
Can any of the company-specific risk be diversified away by investing in both Merck and Ambase Corp 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 Ambase Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Ambase Corp, you can compare the effects of market volatilities on Merck and Ambase Corp 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 Ambase Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Ambase Corp.
Diversification Opportunities for Merck and Ambase Corp
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Ambase is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ambase Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambase Corp 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 Ambase Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambase Corp has no effect on the direction of Merck i.e., Merck and Ambase Corp go up and down completely randomly.
Pair Corralation between Merck and Ambase Corp
Considering the 90-day investment horizon Merck Company is expected to generate 0.57 times more return on investment than Ambase Corp. However, Merck Company is 1.75 times less risky than Ambase Corp. It trades about -0.06 of its potential returns per unit of risk. Ambase Corp is currently generating about -0.07 per unit of risk. If you would invest 9,981 in Merck Company on December 1, 2024 and sell it today you would lose (756.00) from holding Merck Company or give up 7.57% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Merck Company vs. Ambase Corp
Performance |
Timeline |
Merck Company |
Ambase Corp |
Merck and Ambase Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merck and Ambase Corp
The main advantage of trading using opposite Merck and Ambase Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Ambase Corp 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 Ambase Corp will offset losses from the drop in Ambase Corp's long position.The idea behind Merck Company and Ambase 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.Ambase Corp vs. Aztec Land Comb | Ambase Corp vs. Bridgemarq Real Estate | Ambase Corp vs. Agritek Holdings | Ambase Corp vs. Asia Pptys |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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