Correlation Between Merck and Charter Communications
Can any of the company-specific risk be diversified away by investing in both Merck and Charter Communications 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 Merck and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Co and Charter Communications, you can compare the effects of market volatilities on Merck and Charter Communications 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 Merck with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Charter Communications.
Diversification Opportunities for Merck and Charter Communications
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Charter is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merck Co and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Merck 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 Merck Co are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Merck i.e., Merck and Charter Communications go up and down completely randomly.
Pair Corralation between Merck and Charter Communications
Assuming the 90 days trading horizon Merck is expected to generate 2.21 times less return on investment than Charter Communications. But when comparing it to its historical volatility, Merck Co is 1.6 times less risky than Charter Communications. It trades about 0.02 of its potential returns per unit of risk. Charter Communications is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,431 in Charter Communications on September 3, 2024 and sell it today you would earn a total of 551.00 from holding Charter Communications or generate 16.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Merck Co vs. Charter Communications
Performance |
| Timeline |
| Merck |
| Charter Communications |
Merck and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Charter Communications
The main advantage of trading using opposite Merck and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Charter Communications 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 Charter Communications will offset losses from the drop in Charter Communications' long position.| Merck vs. Ross Stores | Merck vs. Hospital Mater Dei | Merck vs. UnitedHealth Group Incorporated | Merck vs. Delta Air Lines |
| Charter Communications vs. Zoom Video Communications | Charter Communications vs. Bio Techne | Charter Communications vs. Livetech da Bahia | Charter Communications vs. Lupatech 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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