Correlation Between Merck and Biote Corp

Can any of the company-specific risk be diversified away by investing in both Merck and Biote 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 Biote 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 biote Corp, you can compare the effects of market volatilities on Merck and Biote 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 Biote Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Biote Corp.

Diversification Opportunities for Merck and Biote Corp

-0.59

Correlation Coefficient

Merck  Biote Corp

Excellent diversification

The 3 months correlation between Merck and Biote is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and biote Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on biote 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 Biote Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of biote Corp has no effect on the direction of Merck i.e., Merck and Biote Corp go up and down completely randomly.

Pair Corralation between Merck and Biote Corp

Considering the 90-day investment horizon Merck Company is expected to generate 0.35 times more return on investment than Biote Corp. However, Merck Company is 2.83 times less risky than Biote Corp. It trades about -0.17 of its potential returns per unit of risk. biote Corp is currently generating about -0.1 per unit of risk. If you would invest  10,297  in Merck Company on October 8, 2024 and sell it today you would lose (383.00) from holding Merck Company or give up 3.72% of portfolio value over 90 days.

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

Merck Company  vs.  biote Corp

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 abnormal 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.

biote Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in biote Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Biote Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Biote Corp

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

The idea behind Merck Company and biote 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.