Correlation Between Merck and SOCGEN

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

By analyzing existing cross correlation between Merck Company and SOCGEN 4677 15 JUN 27, you can compare the effects of market volatilities on Merck and SOCGEN 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 SOCGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SOCGEN.

Diversification Opportunities for Merck and SOCGEN

-0.54

Correlation Coefficient

Merck  SOCGEN

Excellent diversification

The 3 months correlation between Merck and SOCGEN is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SOCGEN 4677 15 JUN 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOCGEN 4677 15 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 SOCGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOCGEN 4677 15 has no effect on the direction of Merck i.e., Merck and SOCGEN go up and down completely randomly.

Pair Corralation between Merck and SOCGEN

Considering the 90-day investment horizon Merck Company is expected to generate 1.98 times more return on investment than SOCGEN. However, Merck is 1.98 times more volatile than SOCGEN 4677 15 JUN 27. It trades about 0.14 of its potential returns per unit of risk. SOCGEN 4677 15 JUN 27 is currently generating about -0.38 per unit of risk. If you would invest  9,656  in Merck Company on September 17, 2024 and sell it today you would earn a total of  376.00  from holding Merck Company or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.81%
Values	Daily Returns

Merck Company  vs.  SOCGEN 4677 15 JUN 27

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.

SOCGEN 4677 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOCGEN 4677 15 JUN 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat 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 SOCGEN 4677 15 JUN 27 investors.

Pair Trading with Merck and SOCGEN

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

The idea behind Merck Company and SOCGEN 4677 15 JUN 27 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.