Correlation Between Merck and Erste Group
Can any of the company-specific risk be diversified away by investing in both Merck and Erste Group 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 Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Erste Group Bank, you can compare the effects of market volatilities on Merck and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Erste Group.
Diversification Opportunities for Merck and Erste Group
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Erste is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Merck i.e., Merck and Erste Group go up and down completely randomly.
Pair Corralation between Merck and Erste Group
Assuming the 90 days trading horizon Merck Company is expected to under-perform the Erste Group. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.2 times less risky than Erste Group. The stock trades about -0.02 of its potential returns per unit of risk. The Erste Group Bank is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,923 in Erste Group Bank on August 29, 2024 and sell it today you would earn a total of 229.00 from holding Erste Group Bank or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Erste Group Bank
Performance |
| Timeline |
| Merck Company |
| Erste Group Bank |
Merck and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Erste Group
The main advantage of trading using opposite Merck and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| Merck vs. RATH Aktiengesellschaft | Merck vs. AT S Austria | Merck vs. BAWAG Group AG | Merck vs. Semperit Aktiengesellschaft Holding |
| Erste Group vs. Raiffeisen Bank International | Erste Group vs. OMV Aktiengesellschaft | Erste Group vs. Voestalpine AG | Erste Group vs. Vienna Insurance Group |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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