Correlation Between Merck and Compugen
Can any of the company-specific risk be diversified away by investing in both Merck and Compugen 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 Compugen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Compugen, you can compare the effects of market volatilities on Merck and Compugen 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 Compugen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Compugen.
Diversification Opportunities for Merck and Compugen
Very poor diversification
The 3 months correlation between Merck and Compugen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Compugen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugen 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 Compugen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugen has no effect on the direction of Merck i.e., Merck and Compugen go up and down completely randomly.
Pair Corralation between Merck and Compugen
Considering the 90-day investment horizon Merck Company is expected to generate 0.32 times more return on investment than Compugen. However, Merck Company is 3.11 times less risky than Compugen. It trades about -0.03 of its potential returns per unit of risk. Compugen is currently generating about -0.03 per unit of risk. If you would invest 10,423 in Merck Company on August 29, 2024 and sell it today you would lose (111.00) from holding Merck Company or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Compugen
Performance |
| Timeline |
| Merck Company |
| Compugen |
Merck and Compugen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Compugen
The main advantage of trading using opposite Merck and Compugen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Compugen 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 Compugen will offset losses from the drop in Compugen's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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