Correlation Between Oberbank and Merck

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

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

Diversification Opportunities for Oberbank and Merck

-0.6

Correlation Coefficient

Oberbank  Merck

Excellent diversification

The 3 months correlation between Oberbank and Merck is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oberbank AG and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Oberbank 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 Oberbank AG are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Oberbank i.e., Oberbank and Merck go up and down completely randomly.

Pair Corralation between Oberbank and Merck

Assuming the 90 days trading horizon Oberbank AG is expected to generate 0.12 times more return on investment than Merck. However, Oberbank AG is 8.13 times less risky than Merck. It trades about 0.0 of its potential returns per unit of risk. Merck Company is currently generating about -0.12 per unit of risk. If you would invest  7,000  in Oberbank AG on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Oberbank AG or generate 0.0% return on investment over 90 days.

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

Oberbank AG  vs.  Merck Company

Oberbank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oberbank AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Oberbank is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 inconsistent performance, the Stock's forward-looking signals remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Oberbank and Merck

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

The idea behind Oberbank AG and Merck Company 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.