Correlation Between Otsuka Holdings and Merck

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

By analyzing existing cross correlation between Otsuka Holdings Co and Merck Company, you can compare the effects of market volatilities on Otsuka Holdings and Merck 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 Otsuka Holdings with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otsuka Holdings and Merck.

Diversification Opportunities for Otsuka Holdings and Merck

0.0

Correlation Coefficient

Otsuka Holdings  Merck

Pay attention - limited upside

The 3 months correlation between Otsuka and Merck is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Otsuka Holdings Co and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Otsuka Holdings 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 Otsuka Holdings Co are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Otsuka Holdings i.e., Otsuka Holdings and Merck go up and down completely randomly.

Pair Corralation between Otsuka Holdings and Merck

If you would invest (100.00) in Otsuka Holdings Co on December 5, 2024 and sell it today you would earn a total of  100.00  from holding Otsuka Holdings Co or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Otsuka Holdings Co  vs.  Merck Company

Otsuka Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Otsuka Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Otsuka Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Otsuka Holdings and Merck

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

The idea behind Otsuka Holdings Co and Merck Company 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.