Correlation Between Anheuser Busch and Merck
Can any of the company-specific risk be diversified away by investing in both Anheuser Busch 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 Anheuser Busch and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anheuser Busch InBev SANV and Merck Company, you can compare the effects of market volatilities on Anheuser Busch 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 Anheuser Busch with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and Merck.
Diversification Opportunities for Anheuser Busch and Merck
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Anheuser and Merck is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Anheuser Busch 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 Anheuser Busch InBev SANV 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 Anheuser Busch i.e., Anheuser Busch and Merck go up and down completely randomly.
Pair Corralation between Anheuser Busch and Merck
Assuming the 90 days trading horizon Anheuser Busch InBev SANV is expected to under-perform the Merck. In addition to that, Anheuser Busch is 1.6 times more volatile than Merck Company. It trades about -0.35 of its total potential returns per unit of risk. Merck Company is currently generating about -0.21 per unit of volatility. If you would invest 9,890 in Merck Company on August 24, 2024 and sell it today you would lose (510.00) from holding Merck Company or give up 5.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Anheuser Busch InBev SANV vs. Merck Company
Performance |
| Timeline |
| Anheuser Busch InBev |
| Merck Company |
Anheuser Busch and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anheuser Busch and Merck
The main advantage of trading using opposite Anheuser Busch and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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.| Anheuser Busch vs. AT S Austria | Anheuser Busch vs. BAWAG Group AG | Anheuser Busch vs. Semperit Aktiengesellschaft Holding | Anheuser Busch vs. Telekom Austria AG |
| Merck vs. Vienna Insurance Group | Merck vs. Oberbank AG | Merck vs. Wiener Privatbank SE | Merck vs. CNH Industrial NV |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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