Correlation Between Merck and Amneal Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Merck and Amneal Pharmaceuticals 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 Amneal Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Amneal Pharmaceuticals, you can compare the effects of market volatilities on Merck and Amneal Pharmaceuticals 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 Amneal Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Amneal Pharmaceuticals.
Diversification Opportunities for Merck and Amneal Pharmaceuticals
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merck and Amneal is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Amneal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amneal Pharmaceuticals 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 Amneal Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amneal Pharmaceuticals has no effect on the direction of Merck i.e., Merck and Amneal Pharmaceuticals go up and down completely randomly.
Pair Corralation between Merck and Amneal Pharmaceuticals
Assuming the 90 days horizon Merck is expected to generate 1.9 times less return on investment than Amneal Pharmaceuticals. But when comparing it to its historical volatility, Merck Company is 1.54 times less risky than Amneal Pharmaceuticals. It trades about 0.17 of its potential returns per unit of risk. Amneal Pharmaceuticals is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 740.00 in Amneal Pharmaceuticals on November 6, 2024 and sell it today you would earn a total of 85.00 from holding Amneal Pharmaceuticals or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Merck Company vs. Amneal Pharmaceuticals
Performance |
| Timeline |
| Merck Company |
| Amneal Pharmaceuticals |
Merck and Amneal Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Amneal Pharmaceuticals
The main advantage of trading using opposite Merck and Amneal Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Amneal Pharmaceuticals 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 Amneal Pharmaceuticals will offset losses from the drop in Amneal Pharmaceuticals' long position.| Merck vs. DIVERSIFIED ROYALTY | Merck vs. PPHE HOTEL GROUP | Merck vs. Sunstone Hotel Investors | Merck vs. Guangdong Investment Limited |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |