Correlation Between Merck and DBS Group
Can any of the company-specific risk be diversified away by investing in both Merck and DBS Group 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 DBS Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and DBS Group Holdings, you can compare the effects of market volatilities on Merck and DBS Group 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 DBS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and DBS Group.
Diversification Opportunities for Merck and DBS Group
Pay attention - limited upside
The 3 months correlation between Merck and DBS is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group 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 DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of Merck i.e., Merck and DBS Group go up and down completely randomly.
Pair Corralation between Merck and DBS Group
Considering the 90-day investment horizon Merck Company is expected to under-perform the DBS Group. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.61 times less risky than DBS Group. The stock trades about -0.22 of its potential returns per unit of risk. The DBS Group Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 11,727 in DBS Group Holdings on August 23, 2024 and sell it today you would earn a total of 1,043 from holding DBS Group Holdings or generate 8.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. DBS Group Holdings
Performance |
| Timeline |
| Merck Company |
| DBS Group Holdings |
Merck and DBS Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and DBS Group
The main advantage of trading using opposite Merck and DBS Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, DBS Group 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 DBS Group will offset losses from the drop in DBS Group's long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
| DBS Group vs. Pioneer Floating Rate | DBS Group vs. The Gabelli Equity | DBS Group vs. Pioneer Municipal High | DBS Group vs. Nuveen Global High |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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