Correlation Between Merck and 775371AU1

Can any of the company-specific risk be diversified away by investing in both Merck and 775371AU1 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 775371AU1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and ROHM HAAS 785, you can compare the effects of market volatilities on Merck and 775371AU1 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 775371AU1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 775371AU1.

Diversification Opportunities for Merck and 775371AU1

-0.74

Correlation Coefficient

Merck  775371AU1

Pay attention - limited upside

The 3 months correlation between Merck and 775371AU1 is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ROHM HAAS 785 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROHM HAAS 785 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 775371AU1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROHM HAAS 785 has no effect on the direction of Merck i.e., Merck and 775371AU1 go up and down completely randomly.

Pair Corralation between Merck and 775371AU1

Considering the 90-day investment horizon Merck Company is expected to generate 2.37 times more return on investment than 775371AU1. However, Merck is 2.37 times more volatile than ROHM HAAS 785. It trades about -0.01 of its potential returns per unit of risk. ROHM HAAS 785 is currently generating about -0.19 per unit of risk. If you would invest  9,993  in Merck Company on October 7, 2024 and sell it today you would lose (79.00) from holding Merck Company or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	63.41%
Values	Daily Returns

Merck Company  vs.  ROHM HAAS 785

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.

ROHM HAAS 785

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROHM HAAS 785 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ROHM HAAS 785 investors.

Pair Trading with Merck and 775371AU1

The main advantage of trading using opposite Merck and 775371AU1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 775371AU1 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 775371AU1 will offset losses from the drop in 775371AU1's long position.

The idea behind Merck Company and ROHM HAAS 785 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.