Correlation Between Merck and ALTICE

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

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

Diversification Opportunities for Merck and ALTICE

-0.26

Correlation Coefficient

Merck  ALTICE

Very good diversification

The 3 months correlation between Merck and ALTICE is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ALTICE FRANCE S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALTICE FRANCE S 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 ALTICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALTICE FRANCE S has no effect on the direction of Merck i.e., Merck and ALTICE go up and down completely randomly.

Pair Corralation between Merck and ALTICE

Considering the 90-day investment horizon Merck Company is expected to under-perform the ALTICE. In addition to that, Merck is 1.03 times more volatile than ALTICE FRANCE S. It trades about -0.07 of its total potential returns per unit of risk. ALTICE FRANCE S is currently generating about -0.01 per unit of volatility. If you would invest  7,598  in ALTICE FRANCE S on December 30, 2024 and sell it today you would lose (78.00) from holding ALTICE FRANCE S or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.77%
Values	Daily Returns

Merck Company  vs.  ALTICE FRANCE S

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.

ALTICE FRANCE S

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Merck and ALTICE

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

The idea behind Merck Company and ALTICE FRANCE S 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.