Correlation Between Merck and INC Research
Can any of the company-specific risk be diversified away by investing in both Merck and INC Research 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 INC Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and INC Research Holdings, you can compare the effects of market volatilities on Merck and INC Research 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 INC Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and INC Research.
Diversification Opportunities for Merck and INC Research
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and INC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and INC Research Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INC Research 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 INC Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INC Research Holdings has no effect on the direction of Merck i.e., Merck and INC Research go up and down completely randomly.
Pair Corralation between Merck and INC Research
Considering the 90-day investment horizon Merck Company is expected to generate 0.21 times more return on investment than INC Research. However, Merck Company is 4.73 times less risky than INC Research. It trades about -0.1 of its potential returns per unit of risk. INC Research Holdings is currently generating about -0.12 per unit of risk. If you would invest 10,423 in Merck Company on August 28, 2024 and sell it today you would lose (307.00) from holding Merck Company or give up 2.95% 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. INC Research Holdings
Performance |
| Timeline |
| Merck Company |
| INC Research Holdings |
Merck and INC Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and INC Research
The main advantage of trading using opposite Merck and INC Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, INC Research 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 INC Research will offset losses from the drop in INC Research's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| INC Research vs. AYR Strategies Class | INC Research vs. Verano Holdings Corp | INC Research vs. TILT Holdings | INC Research vs. Lowell Farms |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |