Correlation Between Merck and 15089QAP9

Can any of the company-specific risk be diversified away by investing in both Merck and 15089QAP9 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 15089QAP9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and CE 6379 15 JUL 32, you can compare the effects of market volatilities on Merck and 15089QAP9 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 15089QAP9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 15089QAP9.

Diversification Opportunities for Merck and 15089QAP9

-0.44

Correlation Coefficient

Merck  15089QAP9

Very good diversification

The 3 months correlation between Merck and 15089QAP9 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CE 6379 15 JUL 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CE 6379 15 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 15089QAP9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CE 6379 15 has no effect on the direction of Merck i.e., Merck and 15089QAP9 go up and down completely randomly.

Pair Corralation between Merck and 15089QAP9

Considering the 90-day investment horizon Merck Company is expected to under-perform the 15089QAP9. In addition to that, Merck is 2.49 times more volatile than CE 6379 15 JUL 32. It trades about -0.07 of its total potential returns per unit of risk. CE 6379 15 JUL 32 is currently generating about -0.02 per unit of volatility. If you would invest  10,195  in CE 6379 15 JUL 32 on December 30, 2024 and sell it today you would lose (117.00) from holding CE 6379 15 JUL 32 or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Merck Company  vs.  CE 6379 15 JUL 32

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.

CE 6379 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days CE 6379 15 JUL 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 15089QAP9 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 15089QAP9

The main advantage of trading using opposite Merck and 15089QAP9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 15089QAP9 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 15089QAP9 will offset losses from the drop in 15089QAP9's long position.

The idea behind Merck Company and CE 6379 15 JUL 32 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.