Correlation Between Hisamitsu Pharmaceutical and Merck
Can any of the company-specific risk be diversified away by investing in both Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hisamitsu Pharmaceutical Co and Merck Company, you can compare the effects of market volatilities on Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisamitsu Pharmaceutical and Merck.
Diversification Opportunities for Hisamitsu Pharmaceutical and Merck
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hisamitsu and Merck is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hisamitsu Pharmaceutical Co and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Hisamitsu Pharmaceutical 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 Hisamitsu Pharmaceutical Co 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 Hisamitsu Pharmaceutical i.e., Hisamitsu Pharmaceutical and Merck go up and down completely randomly.
Pair Corralation between Hisamitsu Pharmaceutical and Merck
Assuming the 90 days horizon Hisamitsu Pharmaceutical Co is expected to generate 1.07 times more return on investment than Merck. However, Hisamitsu Pharmaceutical is 1.07 times more volatile than Merck Company. It trades about 0.02 of its potential returns per unit of risk. Merck Company is currently generating about -0.01 per unit of risk. If you would invest 2,500 in Hisamitsu Pharmaceutical Co on November 7, 2024 and sell it today you would earn a total of 160.00 from holding Hisamitsu Pharmaceutical Co or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hisamitsu Pharmaceutical Co vs. Merck Company
Performance |
| Timeline |
| Hisamitsu Pharmaceutical |
| Merck Company |
Hisamitsu Pharmaceutical and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hisamitsu Pharmaceutical and Merck
The main advantage of trading using opposite Hisamitsu Pharmaceutical and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hisamitsu Pharmaceutical 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.The idea behind Hisamitsu Pharmaceutical Co and Merck Company pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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.
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