Correlation Between Merck and Asia Broadband
Can any of the company-specific risk be diversified away by investing in both Merck and Asia Broadband 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 Asia Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Asia Broadband, you can compare the effects of market volatilities on Merck and Asia Broadband 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 Asia Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Asia Broadband.
Diversification Opportunities for Merck and Asia Broadband
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and Asia is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Asia Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Broadband 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 Asia Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Broadband has no effect on the direction of Merck i.e., Merck and Asia Broadband go up and down completely randomly.
Pair Corralation between Merck and Asia Broadband
Considering the 90-day investment horizon Merck Company is expected to under-perform the Asia Broadband. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.7 times less risky than Asia Broadband. The stock trades about -0.12 of its potential returns per unit of risk. The Asia Broadband is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2.42 in Asia Broadband on December 1, 2024 and sell it today you would lose (0.01) from holding Asia Broadband or give up 0.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Asia Broadband
Performance |
| Timeline |
| Merck Company |
| Asia Broadband |
Merck and Asia Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Asia Broadband
The main advantage of trading using opposite Merck and Asia Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Asia Broadband 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 Asia Broadband will offset losses from the drop in Asia Broadband's long position.The idea behind Merck Company and Asia Broadband pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Asia Broadband vs. Fury Gold Mines | Asia Broadband vs. Lion Copper and | Asia Broadband vs. Trilogy Metals | Asia Broadband vs. Western Copper and |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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