Correlation Between Merck and Banco Bradesco
Can any of the company-specific risk be diversified away by investing in both Merck and Banco Bradesco 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 Banco Bradesco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Banco Bradesco DRC, you can compare the effects of market volatilities on Merck and Banco Bradesco 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 Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Banco Bradesco.
Diversification Opportunities for Merck and Banco Bradesco
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Merck and Banco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Banco Bradesco DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco DRC 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 Banco Bradesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bradesco DRC has no effect on the direction of Merck i.e., Merck and Banco Bradesco go up and down completely randomly.
Pair Corralation between Merck and Banco Bradesco
Assuming the 90 days trading horizon Merck Company is expected to generate 0.66 times more return on investment than Banco Bradesco. However, Merck Company is 1.52 times less risky than Banco Bradesco. It trades about -0.17 of its potential returns per unit of risk. Banco Bradesco DRC is currently generating about -0.16 per unit of risk. If you would invest 3,044,962 in Merck Company on November 2, 2024 and sell it today you would lose (707,462) from holding Merck Company or give up 23.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Merck Company vs. Banco Bradesco DRC
Performance |
| Timeline |
| Merck Company |
| Banco Bradesco DRC |
Merck and Banco Bradesco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Banco Bradesco
The main advantage of trading using opposite Merck and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Banco Bradesco 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 Banco Bradesco will offset losses from the drop in Banco Bradesco's long position.| Merck vs. Telecom Argentina | Merck vs. United States Steel | Merck vs. Agrometal SAI | Merck vs. Harmony Gold Mining |
| Banco Bradesco vs. Compania de Transporte | Banco Bradesco vs. Harmony Gold Mining | Banco Bradesco vs. Transportadora de Gas | Banco Bradesco vs. Telecom Argentina |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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