Correlation Between Merck and China CITIC

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

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

Diversification Opportunities for Merck and China CITIC

0.0

Correlation Coefficient

Merck  China CITIC

Pay attention - limited upside

The 3 months correlation between Merck and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and China CITIC Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China CITIC Bank 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 China CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China CITIC Bank has no effect on the direction of Merck i.e., Merck and China CITIC go up and down completely randomly.

Pair Corralation between Merck and China CITIC

If you would invest (100.00) in China CITIC Bank on December 28, 2024 and sell it today you would earn a total of  100.00  from holding China CITIC Bank or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Merck Company  vs.  China CITIC Bank

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 latest uncertain 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.

China CITIC Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days China CITIC Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, China CITIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Merck and China CITIC

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

The idea behind Merck Company and China CITIC Bank 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.