Correlation Between Merck and Astra Energy
Can any of the company-specific risk be diversified away by investing in both Merck and Astra Energy 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 Astra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Astra Energy, you can compare the effects of market volatilities on Merck and Astra Energy 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 Astra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Astra Energy.
Diversification Opportunities for Merck and Astra Energy
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merck and Astra is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Astra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Energy 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 Astra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Energy has no effect on the direction of Merck i.e., Merck and Astra Energy go up and down completely randomly.
Pair Corralation between Merck and Astra Energy
Considering the 90-day investment horizon Merck Company is expected to under-perform the Astra Energy. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 7.26 times less risky than Astra Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Astra Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 7.80 in Astra Energy on November 4, 2024 and sell it today you would earn a total of 3.20 from holding Astra Energy or generate 41.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Merck Company vs. Astra Energy
Performance |
| Timeline |
| Merck Company |
| Astra Energy |
Merck and Astra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Astra Energy
The main advantage of trading using opposite Merck and Astra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Astra Energy 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 Astra Energy will offset losses from the drop in Astra Energy's long position.The idea behind Merck Company and Astra Energy 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.| Astra Energy vs. Alternus Energy Group | Astra Energy vs. American Security Resources | Astra Energy vs. Carnegie Clean Energy | Astra Energy vs. Brenmiller Energy Ltd |
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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