Correlation Between Merck and ChromoCure
Can any of the company-specific risk be diversified away by investing in both Merck and ChromoCure 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 ChromoCure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ChromoCure, you can compare the effects of market volatilities on Merck and ChromoCure 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 ChromoCure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ChromoCure.
Diversification Opportunities for Merck and ChromoCure
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and ChromoCure is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ChromoCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChromoCure 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 ChromoCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChromoCure has no effect on the direction of Merck i.e., Merck and ChromoCure go up and down completely randomly.
Pair Corralation between Merck and ChromoCure
If you would invest (100.00) in ChromoCure on October 13, 2024 and sell it today you would earn a total of 100.00 from holding ChromoCure or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 0.0% |
| Values | Daily Returns |
Merck Company vs. ChromoCure
Performance |
| Timeline |
| Merck Company |
| ChromoCure |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and ChromoCure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ChromoCure
The main advantage of trading using opposite Merck and ChromoCure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ChromoCure 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 ChromoCure will offset losses from the drop in ChromoCure's long position.The idea behind Merck Company and ChromoCure 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.| ChromoCure vs. 51Talk Online Education | ChromoCure vs. NetEase | ChromoCure vs. Skillful Craftsman Education | ChromoCure vs. Eltek |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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