Correlation Between Merck and Doma Holdings

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

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

Diversification Opportunities for Merck and Doma Holdings

0.0

Correlation Coefficient

Merck  Doma Holdings

Pay attention - limited upside

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

Pair Corralation between Merck and Doma Holdings

If you would invest (100.00) in Doma Holdings on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Doma Holdings 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.  Doma Holdings

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.

Doma Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Doma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Doma Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and Doma Holdings

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

The idea behind Merck Company and Doma Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.