Correlation Between Merck KGaA and Haleon PLC
Can any of the company-specific risk be diversified away by investing in both Merck KGaA and Haleon PLC 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 KGaA and Haleon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck KGaA and Haleon PLC, you can compare the effects of market volatilities on Merck KGaA and Haleon PLC 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 KGaA with a short position of Haleon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck KGaA and Haleon PLC.
Diversification Opportunities for Merck KGaA and Haleon PLC
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merck and Haleon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck KGaA and Haleon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon PLC and Merck KGaA 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 KGaA are associated (or correlated) with Haleon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon PLC has no effect on the direction of Merck KGaA i.e., Merck KGaA and Haleon PLC go up and down completely randomly.
Pair Corralation between Merck KGaA and Haleon PLC
Assuming the 90 days trading horizon Merck KGaA is expected to under-perform the Haleon PLC. But the stock apears to be less risky and, when comparing its historical volatility, Merck KGaA is 1.59 times less risky than Haleon PLC. The stock trades about -0.01 of its potential returns per unit of risk. The Haleon PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 700.00 in Haleon PLC on September 12, 2024 and sell it today you would earn a total of 180.00 from holding Haleon PLC or generate 25.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck KGaA vs. Haleon PLC
Performance |
| Timeline |
| Merck KGaA |
| Haleon PLC |
Merck KGaA and Haleon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck KGaA and Haleon PLC
The main advantage of trading using opposite Merck KGaA and Haleon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck KGaA position performs unexpectedly, Haleon PLC 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 Haleon PLC will offset losses from the drop in Haleon PLC's long position.| Merck KGaA vs. CanSino Biologics | Merck KGaA vs. Superior Plus Corp | Merck KGaA vs. SIVERS SEMICONDUCTORS AB | Merck KGaA vs. CHINA HUARONG ENERHD 50 |
| Haleon PLC vs. CanSino Biologics | Haleon PLC vs. Superior Plus Corp | Haleon PLC vs. SIVERS SEMICONDUCTORS AB | Haleon PLC vs. CHINA HUARONG ENERHD 50 |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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