Correlation Between PULSION Medical and Merck

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

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

Diversification Opportunities for PULSION Medical and Merck

-0.23

Correlation Coefficient

PULSION Medical  Merck

Very good diversification

The 3 months correlation between PULSION and Merck is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding PULSION Medical Systems and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck and PULSION Medical 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 PULSION Medical Systems 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 has no effect on the direction of PULSION Medical i.e., PULSION Medical and Merck go up and down completely randomly.

Pair Corralation between PULSION Medical and Merck

Assuming the 90 days trading horizon PULSION Medical Systems is expected to under-perform the Merck. But the stock apears to be less risky and, when comparing its historical volatility, PULSION Medical Systems is 2.4 times less risky than Merck. The stock trades about -0.14 of its potential returns per unit of risk. The Merck Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  9,828  in Merck Co on October 9, 2024 and sell it today you would lose (48.00) from holding Merck Co or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PULSION Medical Systems  vs.  Merck Co

PULSION Medical Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PULSION Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PULSION Medical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Merck

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Merck is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PULSION Medical and Merck

The main advantage of trading using opposite PULSION Medical and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PULSION Medical 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 PULSION Medical Systems and Merck Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.