Correlation Between Merck and YPF SA
Can any of the company-specific risk be diversified away by investing in both Merck and YPF SA 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 YPF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and YPF SA D, you can compare the effects of market volatilities on Merck and YPF SA 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 YPF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and YPF SA.
Diversification Opportunities for Merck and YPF SA
Very good diversification
The 3 months correlation between Merck and YPF is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and YPF SA D in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YPF SA D 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 YPF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YPF SA D has no effect on the direction of Merck i.e., Merck and YPF SA go up and down completely randomly.
Pair Corralation between Merck and YPF SA
Assuming the 90 days trading horizon Merck is expected to generate 2.93 times less return on investment than YPF SA. But when comparing it to its historical volatility, Merck Company is 1.69 times less risky than YPF SA. It trades about 0.08 of its potential returns per unit of risk. YPF SA D is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,785,000 in YPF SA D on October 20, 2024 and sell it today you would earn a total of 265,000 from holding YPF SA D or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. YPF SA D
Performance |
| Timeline |
| Merck Company |
| YPF SA D |
Merck and YPF SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and YPF SA
The main advantage of trading using opposite Merck and YPF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, YPF SA 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 YPF SA will offset losses from the drop in YPF SA's long position.The idea behind Merck Company and YPF SA D pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| YPF SA vs. Grupo Financiero Galicia | YPF SA vs. Pampa Energia SA | YPF SA vs. Banco Macro SA | YPF SA vs. Aluar Aluminio Argentino |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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