Correlation Between Merck and CanSino Biologics
Can any of the company-specific risk be diversified away by investing in both Merck and CanSino Biologics 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 CanSino Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and CanSino Biologics, you can compare the effects of market volatilities on Merck and CanSino Biologics 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 CanSino Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CanSino Biologics.
Diversification Opportunities for Merck and CanSino Biologics
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and CanSino is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CanSino Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanSino Biologics 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 CanSino Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanSino Biologics has no effect on the direction of Merck i.e., Merck and CanSino Biologics go up and down completely randomly.
Pair Corralation between Merck and CanSino Biologics
Assuming the 90 days horizon Merck Company is expected to under-perform the CanSino Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 3.93 times less risky than CanSino Biologics. The stock trades about -0.14 of its potential returns per unit of risk. The CanSino Biologics is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 250.00 in CanSino Biologics on September 26, 2024 and sell it today you would earn a total of 114.00 from holding CanSino Biologics or generate 45.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. CanSino Biologics
Performance |
| Timeline |
| Merck Company |
| CanSino Biologics |
Merck and CanSino Biologics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CanSino Biologics
The main advantage of trading using opposite Merck and CanSino Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CanSino Biologics 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 CanSino Biologics will offset losses from the drop in CanSino Biologics' long position.| Merck vs. Takeda Pharmaceutical | Merck vs. HANSOH PHARMAC HD 00001 | Merck vs. Guangzhou Baiyunshan Pharmaceutical | Merck vs. ASPEN PHARUNADR 1 |
| CanSino Biologics vs. Merck Company | CanSino Biologics vs. Takeda Pharmaceutical | CanSino Biologics vs. HANSOH PHARMAC HD 00001 | CanSino Biologics vs. Guangzhou Baiyunshan Pharmaceutical |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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