Correlation Between Merck and GASBCM

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

By analyzing existing cross correlation between Merck Company and GASBCM 6129 23 FEB 38, you can compare the effects of market volatilities on Merck and GASBCM 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 GASBCM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and GASBCM.

Diversification Opportunities for Merck and GASBCM

-0.16

Correlation Coefficient

Merck  GASBCM

Good diversification

The 3 months correlation between Merck and GASBCM is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and GASBCM 6129 23 FEB 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GASBCM 6129 23 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 GASBCM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GASBCM 6129 23 has no effect on the direction of Merck i.e., Merck and GASBCM go up and down completely randomly.

Pair Corralation between Merck and GASBCM

Considering the 90-day investment horizon Merck Company is expected to generate 3.76 times more return on investment than GASBCM. However, Merck is 3.76 times more volatile than GASBCM 6129 23 FEB 38. It trades about 0.36 of its potential returns per unit of risk. GASBCM 6129 23 FEB 38 is currently generating about 0.71 per unit of risk. If you would invest  8,640  in Merck Company on December 10, 2024 and sell it today you would earn a total of  883.00  from holding Merck Company or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.0%
Values	Daily Returns

Merck Company  vs.  GASBCM 6129 23 FEB 38

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 quite persistent basic indicators, Merck is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

GASBCM 6129 23

Risk-Adjusted Performance

Very Weak

Over the last 90 days GASBCM 6129 23 FEB 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GASBCM 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 GASBCM

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

The idea behind Merck Company and GASBCM 6129 23 FEB 38 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.