Correlation Between Merck and Diguang Intl
Can any of the company-specific risk be diversified away by investing in both Merck and Diguang Intl 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 Diguang Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Diguang Intl Dev, you can compare the effects of market volatilities on Merck and Diguang Intl 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 Diguang Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Diguang Intl.
Diversification Opportunities for Merck and Diguang Intl
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Diguang is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Diguang Intl Dev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diguang Intl Dev 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 Diguang Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diguang Intl Dev has no effect on the direction of Merck i.e., Merck and Diguang Intl go up and down completely randomly.
Pair Corralation between Merck and Diguang Intl
Considering the 90-day investment horizon Merck is expected to generate 724.92 times less return on investment than Diguang Intl. But when comparing it to its historical volatility, Merck Company is 63.92 times less risky than Diguang Intl. It trades about 0.01 of its potential returns per unit of risk. Diguang Intl Dev is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.95 in Diguang Intl Dev on September 4, 2024 and sell it today you would lose (0.86) from holding Diguang Intl Dev or give up 90.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Diguang Intl Dev
Performance |
| Timeline |
| Merck Company |
| Diguang Intl Dev |
Merck and Diguang Intl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Diguang Intl
The main advantage of trading using opposite Merck and Diguang Intl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Diguang Intl 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 Diguang Intl will offset losses from the drop in Diguang Intl's long position.| Merck vs. Crinetics Pharmaceuticals | Merck vs. Enanta Pharmaceuticals | Merck vs. Amicus Therapeutics | Merck vs. Connect Biopharma Holdings |
| Diguang Intl vs. Griffon | Diguang Intl vs. Jeld Wen Holding | Diguang Intl vs. Canlan Ice Sports | Diguang Intl vs. Harmony Gold Mining |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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