Correlation Between Merck and Zegona Communications
Can any of the company-specific risk be diversified away by investing in both Merck and Zegona Communications 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 Zegona Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Zegona Communications Plc, you can compare the effects of market volatilities on Merck and Zegona Communications 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 Zegona Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Zegona Communications.
Diversification Opportunities for Merck and Zegona Communications
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Zegona is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications Plc 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 Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of Merck i.e., Merck and Zegona Communications go up and down completely randomly.
Pair Corralation between Merck and Zegona Communications
Assuming the 90 days trading horizon Merck Company is expected to under-perform the Zegona Communications. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.13 times less risky than Zegona Communications. The stock trades about -0.09 of its potential returns per unit of risk. The Zegona Communications Plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 38,000 in Zegona Communications Plc on October 24, 2024 and sell it today you would earn a total of 1,800 from holding Zegona Communications Plc or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Merck Company vs. Zegona Communications Plc
Performance |
| Timeline |
| Merck Company |
| Zegona Communications Plc |
Merck and Zegona Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Zegona Communications
The main advantage of trading using opposite Merck and Zegona Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Zegona Communications 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 Zegona Communications will offset losses from the drop in Zegona Communications' long position.| Merck vs. Cairo Communication SpA | Merck vs. Medical Properties Trust | Merck vs. Cornish Metals | Merck vs. Hochschild Mining plc |
| Zegona Communications vs. SMA Solar Technology | Zegona Communications vs. Anglo Asian Mining | Zegona Communications vs. Oxford Technology 2 | Zegona Communications vs. iShares Physical Silver |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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