Correlation Between Merck and Altex Industries

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

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

Diversification Opportunities for Merck and Altex Industries

-0.37

Correlation Coefficient

Merck  Altex Industries

Very good diversification

The 3 months correlation between Merck and Altex is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Altex Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altex Industries 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 Altex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altex Industries has no effect on the direction of Merck i.e., Merck and Altex Industries go up and down completely randomly.

Pair Corralation between Merck and Altex Industries

Considering the 90-day investment horizon Merck Company is expected to under-perform the Altex Industries. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 4.45 times less risky than Altex Industries. The stock trades about -0.21 of its potential returns per unit of risk. The Altex Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Altex Industries on September 18, 2024 and sell it today you would earn a total of  10.00  from holding Altex Industries or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Merck Company  vs.  Altex Industries

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 uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Altex Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altex Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Altex Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merck and Altex Industries

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

The idea behind Merck Company and Altex Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.