Correlation Between Merck and Genelux Common

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

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

Diversification Opportunities for Merck and Genelux Common

-0.5

Correlation Coefficient

Merck  Genelux Common

Very good diversification

The 3 months correlation between Merck and Genelux is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Genelux Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genelux Common 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 Genelux Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genelux Common has no effect on the direction of Merck i.e., Merck and Genelux Common go up and down completely randomly.

Pair Corralation between Merck and Genelux Common

Considering the 90-day investment horizon Merck Company is expected to under-perform the Genelux Common. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 5.54 times less risky than Genelux Common. The stock trades about -0.16 of its potential returns per unit of risk. The Genelux Common is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  208.00  in Genelux Common on September 3, 2024 and sell it today you would earn a total of  61.00  from holding Genelux Common or generate 29.33% return on investment over 90 days.

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

Merck Company  vs.  Genelux Common

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 unsteady 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.

Genelux Common

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genelux Common are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Genelux Common showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Genelux Common

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

The idea behind Merck Company and Genelux Common 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.