Correlation Between Merck and Wienerberger
Can any of the company-specific risk be diversified away by investing in both Merck and Wienerberger 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 Wienerberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Wienerberger AG, you can compare the effects of market volatilities on Merck and Wienerberger 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 Wienerberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Wienerberger.
Diversification Opportunities for Merck and Wienerberger
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Wienerberger is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Wienerberger AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wienerberger AG 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 Wienerberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wienerberger AG has no effect on the direction of Merck i.e., Merck and Wienerberger go up and down completely randomly.
Pair Corralation between Merck and Wienerberger
Assuming the 90 days trading horizon Merck Company is expected to generate 0.75 times more return on investment than Wienerberger. However, Merck Company is 1.33 times less risky than Wienerberger. It trades about 0.06 of its potential returns per unit of risk. Wienerberger AG is currently generating about -0.08 per unit of risk. If you would invest 9,650 in Merck Company on August 30, 2024 and sell it today you would earn a total of 160.00 from holding Merck Company or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Wienerberger AG
Performance |
| Timeline |
| Merck Company |
| Wienerberger AG |
Merck and Wienerberger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Wienerberger
The main advantage of trading using opposite Merck and Wienerberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Wienerberger 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 Wienerberger will offset losses from the drop in Wienerberger's long position.| Merck vs. Vienna Insurance Group | Merck vs. Addiko Bank AG | Merck vs. UNIQA Insurance Group | Merck vs. AMAG Austria Metall |
| Wienerberger vs. Voestalpine AG | Wienerberger vs. OMV Aktiengesellschaft | Wienerberger vs. VERBUND AG | Wienerberger vs. Andritz AG |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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