Correlation Between Merck and CYIOS

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

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

Diversification Opportunities for Merck and CYIOS

0.66

Correlation Coefficient

Merck  CYIOS

Poor diversification

The 3 months correlation between Merck and CYIOS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CYIOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CYIOS 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 CYIOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CYIOS has no effect on the direction of Merck i.e., Merck and CYIOS go up and down completely randomly.

Pair Corralation between Merck and CYIOS

Considering the 90-day investment horizon Merck is expected to generate 4.15 times less return on investment than CYIOS. But when comparing it to its historical volatility, Merck Company is 6.31 times less risky than CYIOS. It trades about 0.02 of its potential returns per unit of risk. CYIOS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.99  in CYIOS on September 12, 2024 and sell it today you would lose (0.06) from holding CYIOS or give up 6.06% of portfolio value over 90 days.

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

Merck Company  vs.  CYIOS

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 weak 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.

CYIOS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Merck and CYIOS

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

The idea behind Merck Company and CYIOS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.