Correlation Between Merck and Bio Rad
Can any of the company-specific risk be diversified away by investing in both Merck and Bio Rad 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 Bio Rad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Bio Rad Laboratories, you can compare the effects of market volatilities on Merck and Bio Rad 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 Bio Rad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Bio Rad.
Diversification Opportunities for Merck and Bio Rad
Very weak diversification
The 3 months correlation between Merck and Bio is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Bio Rad Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Rad Laboratories 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 Bio Rad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Rad Laboratories has no effect on the direction of Merck i.e., Merck and Bio Rad go up and down completely randomly.
Pair Corralation between Merck and Bio Rad
Considering the 90-day investment horizon Merck Company is expected to generate 0.68 times more return on investment than Bio Rad. However, Merck Company is 1.47 times less risky than Bio Rad. It trades about -0.12 of its potential returns per unit of risk. Bio Rad Laboratories is currently generating about -0.38 per unit of risk. If you would invest 8,996 in Merck Company on January 5, 2025 and sell it today you would lose (849.00) from holding Merck Company or give up 9.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Bio Rad Laboratories
Performance |
| Timeline |
| Merck Company |
| Bio Rad Laboratories |
Merck and Bio Rad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Bio Rad
The main advantage of trading using opposite Merck and Bio Rad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Bio Rad 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 Bio Rad will offset losses from the drop in Bio Rad's long position.| Merck vs. Upper Street Marketing | Merck vs. Virtual Medical International | Merck vs. Grey Cloak Tech | Merck vs. CuraScientific Corp |
| Bio Rad vs. Tandem Diabetes Care | Bio Rad vs. DexCom Inc | Bio Rad vs. Inspire Medical Systems | Bio Rad vs. Penumbra |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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