Correlation Between Merck and Univar

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

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

Diversification Opportunities for Merck and Univar

-0.85

Correlation Coefficient

Merck  Univar

Pay attention - limited upside

The 3 months correlation between Merck and Univar is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Univar Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univar Inc 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 Univar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univar Inc has no effect on the direction of Merck i.e., Merck and Univar go up and down completely randomly.

Pair Corralation between Merck and Univar

If you would invest  3,593  in Univar Inc on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Univar Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Merck Company  vs.  Univar Inc

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 weak 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.

Univar Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Univar Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Univar is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merck and Univar

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

The idea behind Merck Company and Univar Inc 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.