Correlation Between Longvie SA and Merck
Can any of the company-specific risk be diversified away by investing in both Longvie SA 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 Longvie SA and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Longvie SA and Merck Company, you can compare the effects of market volatilities on Longvie SA 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 Longvie SA with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longvie SA and Merck.
Diversification Opportunities for Longvie SA and Merck
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Longvie and Merck is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Longvie SA and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Longvie SA 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 Longvie SA 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 Longvie SA i.e., Longvie SA and Merck go up and down completely randomly.
Pair Corralation between Longvie SA and Merck
Assuming the 90 days trading horizon Longvie SA is expected to generate 2.25 times more return on investment than Merck. However, Longvie SA is 2.25 times more volatile than Merck Company. It trades about 0.05 of its potential returns per unit of risk. Merck Company is currently generating about -0.27 per unit of risk. If you would invest 4,195 in Longvie SA on September 5, 2024 and sell it today you would earn a total of 190.00 from holding Longvie SA or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Longvie SA vs. Merck Company
Performance |
| Timeline |
| Longvie SA |
| Merck Company |
Longvie SA and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longvie SA and Merck
The main advantage of trading using opposite Longvie SA and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longvie SA 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.| Longvie SA vs. Edesa Holding SA | Longvie SA vs. American Express Co | Longvie SA vs. United States Steel | Longvie SA vs. Capex SA |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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