Correlation Between Merck and ACS Actividades

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

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

Diversification Opportunities for Merck and ACS Actividades

-0.56

Correlation Coefficient

Merck  ACS Actividades

Excellent diversification

The 3 months correlation between Merck and ACS is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ACS Actividades de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACS Actividades de 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 ACS Actividades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACS Actividades de has no effect on the direction of Merck i.e., Merck and ACS Actividades go up and down completely randomly.

Pair Corralation between Merck and ACS Actividades

Considering the 90-day investment horizon Merck Company is expected to under-perform the ACS Actividades. In addition to that, Merck is 1.99 times more volatile than ACS Actividades de. It trades about -0.15 of its total potential returns per unit of risk. ACS Actividades de is currently generating about 0.18 per unit of volatility. If you would invest  4,238  in ACS Actividades de on August 31, 2024 and sell it today you would earn a total of  295.00  from holding ACS Actividades de or generate 6.96% return on investment over 90 days.

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

Merck Company  vs.  ACS Actividades de

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.

ACS Actividades de

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ACS Actividades de are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, ACS Actividades may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Merck and ACS Actividades

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

The idea behind Merck Company and ACS Actividades de 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.