Correlation Between Merck and Allianzim Large

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

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

Diversification Opportunities for Merck and Allianzim Large

-0.62

Correlation Coefficient

Merck  Allianzim Large

Excellent diversification

The 3 months correlation between Merck and Allianzim is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Allianzim Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzim Large Cap 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 Allianzim Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzim Large Cap has no effect on the direction of Merck i.e., Merck and Allianzim Large go up and down completely randomly.

Pair Corralation between Merck and Allianzim Large

Considering the 90-day investment horizon Merck Company is expected to under-perform the Allianzim Large. In addition to that, Merck is 5.69 times more volatile than Allianzim Large Cap. It trades about -0.12 of its total potential returns per unit of risk. Allianzim Large Cap is currently generating about 0.09 per unit of volatility. If you would invest  3,438  in Allianzim Large Cap on December 2, 2024 and sell it today you would earn a total of  29.00  from holding Allianzim Large Cap or generate 0.84% return on investment over 90 days.

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

Merck Company  vs.  Allianzim Large Cap

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.

Allianzim Large Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allianzim Large Cap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Allianzim Large is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merck and Allianzim Large

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

The idea behind Merck Company and Allianzim Large Cap 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.