Correlation Between Merck and Takeda Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Merck and Takeda Pharmaceutical 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 Takeda Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Takeda Pharmaceutical, you can compare the effects of market volatilities on Merck and Takeda Pharmaceutical 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 Takeda Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Takeda Pharmaceutical.
Diversification Opportunities for Merck and Takeda Pharmaceutical
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merck and Takeda is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Merck i.e., Merck and Takeda Pharmaceutical go up and down completely randomly.
Pair Corralation between Merck and Takeda Pharmaceutical
Assuming the 90 days horizon Merck Company is expected to under-perform the Takeda Pharmaceutical. In addition to that, Merck is 1.25 times more volatile than Takeda Pharmaceutical. It trades about -0.01 of its total potential returns per unit of risk. Takeda Pharmaceutical is currently generating about 0.01 per unit of volatility. If you would invest 1,238 in Takeda Pharmaceutical on November 8, 2024 and sell it today you would earn a total of 22.00 from holding Takeda Pharmaceutical or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Takeda Pharmaceutical
Performance |
| Timeline |
| Merck Company |
| Takeda Pharmaceutical |
Merck and Takeda Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Takeda Pharmaceutical
The main advantage of trading using opposite Merck and Takeda Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Takeda Pharmaceutical 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 Takeda Pharmaceutical will offset losses from the drop in Takeda Pharmaceutical's long position.| Merck vs. SENECA FOODS A | Merck vs. THAI BEVERAGE | Merck vs. Fukuyama Transporting Co | Merck vs. MONEYSUPERMARKET |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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