Correlation Between Global Ship and Merck
Can any of the company-specific risk be diversified away by investing in both Global Ship 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 Global Ship and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and Merck Company, you can compare the effects of market volatilities on Global Ship 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 Global Ship with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Merck.
Diversification Opportunities for Global Ship and Merck
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Merck is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Merck go up and down completely randomly.
Pair Corralation between Global Ship and Merck
Assuming the 90 days horizon Global Ship Lease is expected to generate 1.16 times more return on investment than Merck. However, Global Ship is 1.16 times more volatile than Merck Company. It trades about 0.07 of its potential returns per unit of risk. Merck Company is currently generating about 0.01 per unit of risk. If you would invest 1,562 in Global Ship Lease on September 2, 2024 and sell it today you would earn a total of 470.00 from holding Global Ship Lease or generate 30.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. Merck Company
Performance |
| Timeline |
| Global Ship Lease |
| Merck Company |
Global Ship and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and Merck
The main advantage of trading using opposite Global Ship and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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.| Global Ship vs. Wilh Wilhelmsen Holding | Global Ship vs. Superior Plus Corp | Global Ship vs. NMI Holdings | Global Ship vs. Origin Agritech |
| Merck vs. ATRYS HEALTH SA | Merck vs. Global Ship Lease | Merck vs. Japan Tobacco | Merck vs. IMPERIAL TOBACCO |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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