Correlation Between Merck and Aluar Aluminio
Can any of the company-specific risk be diversified away by investing in both Merck and Aluar Aluminio 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 Aluar Aluminio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Aluar Aluminio Argentino, you can compare the effects of market volatilities on Merck and Aluar Aluminio 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 Aluar Aluminio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Aluar Aluminio.
Diversification Opportunities for Merck and Aluar Aluminio
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Aluar is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Aluar Aluminio Argentino in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluar Aluminio Argentino 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 Company are associated (or correlated) with Aluar Aluminio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluar Aluminio Argentino has no effect on the direction of Merck i.e., Merck and Aluar Aluminio go up and down completely randomly.
Pair Corralation between Merck and Aluar Aluminio
Assuming the 90 days trading horizon Merck Company is expected to generate 0.52 times more return on investment than Aluar Aluminio. However, Merck Company is 1.92 times less risky than Aluar Aluminio. It trades about 0.02 of its potential returns per unit of risk. Aluar Aluminio Argentino is currently generating about -0.06 per unit of risk. If you would invest 2,330,000 in Merck Company on November 2, 2024 and sell it today you would earn a total of 7,500 from holding Merck Company or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Aluar Aluminio Argentino
Performance |
| Timeline |
| Merck Company |
| Aluar Aluminio Argentino |
Merck and Aluar Aluminio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Aluar Aluminio
The main advantage of trading using opposite Merck and Aluar Aluminio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Aluar Aluminio 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 Aluar Aluminio will offset losses from the drop in Aluar Aluminio's long position.| Merck vs. Telecom Argentina | Merck vs. United States Steel | Merck vs. Agrometal SAI | Merck vs. Harmony Gold Mining |
| Aluar Aluminio vs. Grimoldi SA | Aluar Aluminio vs. Transportadora de Gas | Aluar Aluminio vs. Agrometal SAI | Aluar Aluminio vs. Alphabet Inc Class A CEDEAR |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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