Correlation Between Merck and ASPEN PHARUNADR
Can any of the company-specific risk be diversified away by investing in both Merck and ASPEN PHARUNADR 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 ASPEN PHARUNADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ASPEN PHARUNADR 1, you can compare the effects of market volatilities on Merck and ASPEN PHARUNADR 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 ASPEN PHARUNADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ASPEN PHARUNADR.
Diversification Opportunities for Merck and ASPEN PHARUNADR
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and ASPEN is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ASPEN PHARUNADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN PHARUNADR 1 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 ASPEN PHARUNADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN PHARUNADR 1 has no effect on the direction of Merck i.e., Merck and ASPEN PHARUNADR go up and down completely randomly.
Pair Corralation between Merck and ASPEN PHARUNADR
Assuming the 90 days horizon Merck Company is expected to generate 0.85 times more return on investment than ASPEN PHARUNADR. However, Merck Company is 1.18 times less risky than ASPEN PHARUNADR. It trades about 0.16 of its potential returns per unit of risk. ASPEN PHARUNADR 1 is currently generating about 0.01 per unit of risk. If you would invest 13,950 in Merck Company on October 28, 2024 and sell it today you would earn a total of 550.00 from holding Merck Company or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. ASPEN PHARUNADR 1
Performance |
| Timeline |
| Merck Company |
| ASPEN PHARUNADR 1 |
Merck and ASPEN PHARUNADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ASPEN PHARUNADR
The main advantage of trading using opposite Merck and ASPEN PHARUNADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ASPEN PHARUNADR 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 ASPEN PHARUNADR will offset losses from the drop in ASPEN PHARUNADR's long position.| Merck vs. STMicroelectronics NV | Merck vs. KIMBALL ELECTRONICS | Merck vs. ARROW ELECTRONICS | Merck vs. Nucletron Electronic Aktiengesellschaft |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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