Correlation Between Exor NV and Merck
Can any of the company-specific risk be diversified away by investing in both Exor NV 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 Exor NV and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exor NV and Merck Company, you can compare the effects of market volatilities on Exor NV 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 Exor NV with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exor NV and Merck.
Diversification Opportunities for Exor NV and Merck
Poor diversification
The 3 months correlation between Exor and Merck is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Exor NV and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Exor NV 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 Exor NV 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 Exor NV i.e., Exor NV and Merck go up and down completely randomly.
Pair Corralation between Exor NV and Merck
Assuming the 90 days trading horizon Exor NV is expected to under-perform the Merck. But the stock apears to be less risky and, when comparing its historical volatility, Exor NV is 1.23 times less risky than Merck. The stock trades about -0.11 of its potential returns per unit of risk. The Merck Company is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 8,974 in Merck Company on September 18, 2024 and sell it today you would earn a total of 586.00 from holding Merck Company or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exor NV vs. Merck Company
Performance |
| Timeline |
| Exor NV |
| Merck Company |
Exor NV and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exor NV and Merck
The main advantage of trading using opposite Exor NV and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exor NV 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.| Exor NV vs. RATH Aktiengesellschaft | Exor NV vs. AT S Austria | Exor NV vs. BAWAG Group AG | Exor NV vs. Semperit Aktiengesellschaft Holding |
| Merck vs. Vienna Insurance Group | Merck vs. Oberbank AG | Merck vs. CNH Industrial NV | Merck vs. Universal Music Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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