Correlation Between Poste Italiane and Merck
Can any of the company-specific risk be diversified away by investing in both Poste Italiane 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 Poste Italiane and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Poste Italiane SpA and Merck Company, you can compare the effects of market volatilities on Poste Italiane 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 Poste Italiane with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Poste Italiane and Merck.
Diversification Opportunities for Poste Italiane and Merck
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Poste and Merck is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Poste Italiane SpA and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Poste Italiane 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 Poste Italiane SpA 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 Poste Italiane i.e., Poste Italiane and Merck go up and down completely randomly.
Pair Corralation between Poste Italiane and Merck
Assuming the 90 days horizon Poste Italiane SpA is expected to under-perform the Merck. But the stock apears to be less risky and, when comparing its historical volatility, Poste Italiane SpA is 1.09 times less risky than Merck. The stock trades about -0.09 of its potential returns per unit of risk. The Merck Company is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 14,030 in Merck Company on October 7, 2024 and sell it today you would earn a total of 5.00 from holding Merck Company or generate 0.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Poste Italiane SpA vs. Merck Company
Performance |
| Timeline |
| Poste Italiane SpA |
| Merck Company |
Poste Italiane and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Poste Italiane and Merck
The main advantage of trading using opposite Poste Italiane and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Poste Italiane 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.| Poste Italiane vs. WIMFARM SA EO | Poste Italiane vs. Titan Machinery | Poste Italiane vs. Perdoceo Education | Poste Italiane vs. AGRICULTBK HADR25 YC |
| Merck vs. Superior Plus Corp | Merck vs. NMI Holdings | Merck vs. SIVERS SEMICONDUCTORS AB | Merck vs. Talanx AG |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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