Correlation Between Grupo Sports and Merck

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

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

Diversification Opportunities for Grupo Sports and Merck

-0.13

Correlation Coefficient

Grupo Sports  Merck

Good diversification

The 3 months correlation between Grupo and Merck is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Grupo Sports 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 Grupo Sports World 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 Grupo Sports i.e., Grupo Sports and Merck go up and down completely randomly.

Pair Corralation between Grupo Sports and Merck

Assuming the 90 days trading horizon Grupo Sports World is expected to generate 0.58 times more return on investment than Merck. However, Grupo Sports World is 1.74 times less risky than Merck. It trades about 0.01 of its potential returns per unit of risk. Merck Company is currently generating about -0.08 per unit of risk. If you would invest  638.00  in Grupo Sports World on December 30, 2024 and sell it today you would earn a total of  2.00  from holding Grupo Sports World or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Grupo Sports World  vs.  Merck Company

Grupo Sports World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Sports World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Grupo Sports and Merck

The main advantage of trading using opposite Grupo Sports and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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 Grupo Sports World 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.