Correlation Between Merck and CLP Holdings
Can any of the company-specific risk be diversified away by investing in both Merck and CLP Holdings 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 CLP Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and CLP Holdings, you can compare the effects of market volatilities on Merck and CLP Holdings 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 CLP Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CLP Holdings.
Diversification Opportunities for Merck and CLP Holdings
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and CLP is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CLP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLP Holdings 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 CLP Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLP Holdings has no effect on the direction of Merck i.e., Merck and CLP Holdings go up and down completely randomly.
Pair Corralation between Merck and CLP Holdings
Considering the 90-day investment horizon Merck Company is expected to under-perform the CLP Holdings. In addition to that, Merck is 1.2 times more volatile than CLP Holdings. It trades about -0.1 of its total potential returns per unit of risk. CLP Holdings is currently generating about 0.04 per unit of volatility. If you would invest 793.00 in CLP Holdings on August 29, 2024 and sell it today you would earn a total of 46.00 from holding CLP Holdings or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. CLP Holdings
Performance |
| Timeline |
| Merck Company |
| CLP Holdings |
Merck and CLP Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CLP Holdings
The main advantage of trading using opposite Merck and CLP Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CLP Holdings 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 CLP Holdings will offset losses from the drop in CLP Holdings' long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| CLP Holdings vs. Hong Kong and | CLP Holdings vs. Power Assets Holdings | CLP Holdings vs. Swire Pacific | CLP Holdings vs. Sun Hung Kai |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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