Correlation Between Merck and Perception Capital

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

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

Diversification Opportunities for Merck and Perception Capital

-0.8

Correlation Coefficient

Merck  Perception Capital

Pay attention - limited upside

The 3 months correlation between Merck and Perception is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Perception Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perception Capital 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 Perception Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perception Capital Corp has no effect on the direction of Merck i.e., Merck and Perception Capital go up and down completely randomly.

Pair Corralation between Merck and Perception Capital

If you would invest  9,656  in Merck Company on September 17, 2024 and sell it today you would earn a total of  544.00  from holding Merck Company or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

Merck Company  vs.  Perception Capital Corp

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 uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Perception Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perception Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Perception Capital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Merck and Perception Capital

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

The idea behind Merck Company and Perception Capital 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.