Correlation Between Merck and Ledesma SAAI
Can any of the company-specific risk be diversified away by investing in both Merck and Ledesma SAAI 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 Ledesma SAAI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Ledesma SAAI, you can compare the effects of market volatilities on Merck and Ledesma SAAI 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 Ledesma SAAI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Ledesma SAAI.
Diversification Opportunities for Merck and Ledesma SAAI
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merck and Ledesma is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ledesma SAAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ledesma SAAI 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 Ledesma SAAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ledesma SAAI has no effect on the direction of Merck i.e., Merck and Ledesma SAAI go up and down completely randomly.
Pair Corralation between Merck and Ledesma SAAI
Assuming the 90 days trading horizon Merck is expected to generate 1.68 times less return on investment than Ledesma SAAI. But when comparing it to its historical volatility, Merck Company is 1.69 times less risky than Ledesma SAAI. It trades about 0.02 of its potential returns per unit of risk. Ledesma SAAI is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 148,000 in Ledesma SAAI on November 2, 2024 and sell it today you would earn a total of 500.00 from holding Ledesma SAAI or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Ledesma SAAI
Performance |
| Timeline |
| Merck Company |
| Ledesma SAAI |
Merck and Ledesma SAAI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Ledesma SAAI
The main advantage of trading using opposite Merck and Ledesma SAAI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Ledesma SAAI 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 Ledesma SAAI will offset losses from the drop in Ledesma SAAI's long position.| Merck vs. Telecom Argentina | Merck vs. United States Steel | Merck vs. Agrometal SAI | Merck vs. Harmony Gold Mining |
| Ledesma SAAI vs. Harmony Gold Mining | Ledesma SAAI vs. Agrometal SAI | Ledesma SAAI vs. United States Steel | Ledesma SAAI vs. Compania de Transporte |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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