Correlation Between Merck and GN Store
Can any of the company-specific risk be diversified away by investing in both Merck and GN Store 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 GN Store into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and GN Store Nord, you can compare the effects of market volatilities on Merck and GN Store 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 GN Store. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and GN Store.
Diversification Opportunities for Merck and GN Store
Almost no diversification
The 3 months correlation between Merck and GNNDY is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and GN Store Nord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GN Store Nord 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 GN Store. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GN Store Nord has no effect on the direction of Merck i.e., Merck and GN Store go up and down completely randomly.
Pair Corralation between Merck and GN Store
Considering the 90-day investment horizon Merck Company is expected to generate 0.74 times more return on investment than GN Store. However, Merck Company is 1.35 times less risky than GN Store. It trades about -0.02 of its potential returns per unit of risk. GN Store Nord is currently generating about -0.04 per unit of risk. If you would invest 10,232 in Merck Company on September 1, 2024 and sell it today you would lose (68.00) from holding Merck Company or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. GN Store Nord
Performance |
| Timeline |
| Merck Company |
| GN Store Nord |
Merck and GN Store Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and GN Store
The main advantage of trading using opposite Merck and GN Store positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, GN Store 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 GN Store will offset losses from the drop in GN Store's long position.The idea behind Merck Company and GN Store Nord pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| GN Store vs. Demant AS ADR | GN Store vs. Sonova Holding AG | GN Store vs. GN Store Nord | GN Store vs. Bone Biologics Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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