Correlation Between Merck and 019736AG2

Can any of the company-specific risk be diversified away by investing in both Merck and 019736AG2 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 019736AG2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and US019736AG29, you can compare the effects of market volatilities on Merck and 019736AG2 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 019736AG2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 019736AG2.

Diversification Opportunities for Merck and 019736AG2

0.64

Correlation Coefficient

Merck  019736AG2

Poor diversification

The 3 months correlation between Merck and 019736AG2 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and US019736AG29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US019736AG29 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 019736AG2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US019736AG29 has no effect on the direction of Merck i.e., Merck and 019736AG2 go up and down completely randomly.

Pair Corralation between Merck and 019736AG2

Considering the 90-day investment horizon Merck Company is expected to under-perform the 019736AG2. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 36.33 times less risky than 019736AG2. The stock trades about 0.0 of its potential returns per unit of risk. The US019736AG29 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,267  in US019736AG29 on September 20, 2024 and sell it today you would earn a total of  435.00  from holding US019736AG29 or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.38%
Values	Daily Returns

Merck Company  vs.  US019736AG29

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.

US019736AG29

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US019736AG29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 019736AG2 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and 019736AG2

The main advantage of trading using opposite Merck and 019736AG2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 019736AG2 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 019736AG2 will offset losses from the drop in 019736AG2's long position.

The idea behind Merck Company and US019736AG29 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.