Correlation Between Merck and Remy Cointreau

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

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

Diversification Opportunities for Merck and Remy Cointreau

0.82

Correlation Coefficient

Merck  Remy Cointreau

Very poor diversification

The 3 months correlation between Merck and Remy is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Remy Cointreau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remy Cointreau SA 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 Remy Cointreau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remy Cointreau SA has no effect on the direction of Merck i.e., Merck and Remy Cointreau go up and down completely randomly.

Pair Corralation between Merck and Remy Cointreau

Considering the 90-day investment horizon Merck Company is expected to under-perform the Remy Cointreau. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.03 times less risky than Remy Cointreau. The stock trades about -0.18 of its potential returns per unit of risk. The Remy Cointreau SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  692.00  in Remy Cointreau SA on September 13, 2024 and sell it today you would lose (29.00) from holding Remy Cointreau SA or give up 4.19% of portfolio value over 90 days.

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

Merck Company  vs.  Remy Cointreau SA

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 abnormal 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.

Remy Cointreau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Remy Cointreau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Remy Cointreau is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and Remy Cointreau

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

The idea behind Merck Company and Remy Cointreau SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.