Correlation Between Merck and Altice USA

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

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

Diversification Opportunities for Merck and Altice USA

-0.48

Correlation Coefficient

Merck  Altice USA

Very good diversification

The 3 months correlation between Merck and Altice is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Altice USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altice USA 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 Altice USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altice USA has no effect on the direction of Merck i.e., Merck and Altice USA go up and down completely randomly.

Pair Corralation between Merck and Altice USA

Considering the 90-day investment horizon Merck Company is expected to under-perform the Altice USA. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.11 times less risky than Altice USA. The stock trades about -0.13 of its potential returns per unit of risk. The Altice USA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  238.00  in Altice USA on November 19, 2024 and sell it today you would earn a total of  44.00  from holding Altice USA or generate 18.49% return on investment over 90 days.

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

Merck Company  vs.  Altice USA

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Altice USA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altice USA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Altice USA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Altice USA

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

The idea behind Merck Company and Altice USA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.