Correlation Between Merck and Betterware

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

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

Diversification Opportunities for Merck and Betterware

0.69

Correlation Coefficient

Merck  Betterware

Poor diversification

The 3 months correlation between Merck and Betterware is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Betterware de Mxico, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betterware de Mxico, 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 Betterware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betterware de Mxico, has no effect on the direction of Merck i.e., Merck and Betterware go up and down completely randomly.

Pair Corralation between Merck and Betterware

Considering the 90-day investment horizon Merck Company is expected to generate 0.56 times more return on investment than Betterware. However, Merck Company is 1.79 times less risky than Betterware. It trades about -0.18 of its potential returns per unit of risk. Betterware de Mxico, is currently generating about -0.12 per unit of risk. If you would invest  11,796  in Merck Company on September 15, 2024 and sell it today you would lose (1,596) from holding Merck Company or give up 13.53% of portfolio value over 90 days.

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

Merck Company  vs.  Betterware de Mxico,

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.

Betterware de Mxico,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Betterware de Mxico, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Merck and Betterware

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

The idea behind Merck Company and Betterware de Mxico, 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.