Correlation Between Merck and Uniqure NV

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

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

Diversification Opportunities for Merck and Uniqure NV

-0.44

Correlation Coefficient

Merck  Uniqure NV

Very good diversification

The 3 months correlation between Merck and Uniqure is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Uniqure NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniqure NV 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 Uniqure NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniqure NV has no effect on the direction of Merck i.e., Merck and Uniqure NV go up and down completely randomly.

Pair Corralation between Merck and Uniqure NV

Considering the 90-day investment horizon Merck Company is expected to under-perform the Uniqure NV. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 19.71 times less risky than Uniqure NV. The stock trades about -0.05 of its potential returns per unit of risk. The Uniqure NV is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  629.00  in Uniqure NV on October 5, 2024 and sell it today you would earn a total of  1,137  from holding Uniqure NV or generate 180.76% 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.  Uniqure NV

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 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.

Uniqure NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Uniqure NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Uniqure NV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Uniqure NV

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

The idea behind Merck Company and Uniqure NV 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.