Correlation Between AT S and Merck
Can any of the company-specific risk be diversified away by investing in both AT S 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 AT S and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AT S Austria and Merck Company, you can compare the effects of market volatilities on AT S 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 AT S with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of AT S and Merck.
Diversification Opportunities for AT S and Merck
Very weak diversification
The 3 months correlation between ATS and Merck is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AT S Austria and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and AT S 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 AT S Austria 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 AT S i.e., AT S and Merck go up and down completely randomly.
Pair Corralation between AT S and Merck
Assuming the 90 days trading horizon AT S Austria is expected to under-perform the Merck. In addition to that, AT S is 2.25 times more volatile than Merck Company. It trades about -0.49 of its total potential returns per unit of risk. Merck Company is currently generating about 0.01 per unit of volatility. If you would invest 9,640 in Merck Company on August 27, 2024 and sell it today you would earn a total of 20.00 from holding Merck Company or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AT S Austria vs. Merck Company
Performance |
| Timeline |
| AT S Austria |
| Merck Company |
AT S and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AT S and Merck
The main advantage of trading using opposite AT S and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AT S 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.| AT S vs. Voestalpine AG | AT S vs. Lenzing Aktiengesellschaft | AT S vs. Andritz AG | AT S vs. OMV Aktiengesellschaft |
| Merck vs. RATH Aktiengesellschaft | Merck vs. AT S Austria | Merck vs. BAWAG Group AG | Merck vs. Semperit Aktiengesellschaft Holding |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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