Correlation Between Merck and CEL SCI

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

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

Diversification Opportunities for Merck and CEL SCI

0.32

Correlation Coefficient

Merck  CEL SCI

Weak diversification

The 3 months correlation between Merck and CEL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CEL SCI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEL SCI 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 CEL SCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEL SCI Corp has no effect on the direction of Merck i.e., Merck and CEL SCI go up and down completely randomly.

Pair Corralation between Merck and CEL SCI

Considering the 90-day investment horizon Merck Company is expected to generate 0.23 times more return on investment than CEL SCI. However, Merck Company is 4.26 times less risky than CEL SCI. It trades about -0.06 of its potential returns per unit of risk. CEL SCI Corp is currently generating about -0.18 per unit of risk. If you would invest  9,901  in Merck Company on December 25, 2024 and sell it today you would lose (670.00) from holding Merck Company or give up 6.77% of portfolio value over 90 days.

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

Merck Company  vs.  CEL SCI Corp

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 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.

CEL SCI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CEL SCI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Merck and CEL SCI

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

The idea behind Merck Company and CEL SCI 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.