Correlation Between AstraZeneca PLC and Merck
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC 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 AstraZeneca PLC and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC ADR and Merck Company, you can compare the effects of market volatilities on AstraZeneca PLC 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 AstraZeneca PLC with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Merck.
Diversification Opportunities for AstraZeneca PLC and Merck
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AstraZeneca and Merck is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC ADR and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and AstraZeneca PLC 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 AstraZeneca PLC ADR 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 AstraZeneca PLC i.e., AstraZeneca PLC and Merck go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Merck
Considering the 90-day investment horizon AstraZeneca PLC ADR is expected to generate 0.73 times more return on investment than Merck. However, AstraZeneca PLC ADR is 1.37 times less risky than Merck. It trades about 0.2 of its potential returns per unit of risk. Merck Company is currently generating about -0.13 per unit of risk. If you would invest 6,339 in AstraZeneca PLC ADR on November 18, 2024 and sell it today you would earn a total of 1,019 from holding AstraZeneca PLC ADR or generate 16.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstraZeneca PLC ADR vs. Merck Company
Performance |
| Timeline |
| AstraZeneca PLC ADR |
| Merck Company |
AstraZeneca PLC and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and Merck
The main advantage of trading using opposite AstraZeneca PLC and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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.| AstraZeneca PLC vs. Novartis AG ADR | AstraZeneca PLC vs. GlaxoSmithKline PLC ADR | AstraZeneca PLC vs. Roche Holding Ltd | AstraZeneca PLC vs. Bristol Myers Squibb |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |