Correlation Between Merck and CIBT Education
Can any of the company-specific risk be diversified away by investing in both Merck and CIBT Education 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 CIBT Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and CIBT Education Group, you can compare the effects of market volatilities on Merck and CIBT Education 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 CIBT Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CIBT Education.
Diversification Opportunities for Merck and CIBT Education
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and CIBT is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CIBT Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBT Education Group 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 CIBT Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBT Education Group has no effect on the direction of Merck i.e., Merck and CIBT Education go up and down completely randomly.
Pair Corralation between Merck and CIBT Education
Considering the 90-day investment horizon Merck Company is expected to under-perform the CIBT Education. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 54.06 times less risky than CIBT Education. The stock trades about 0.0 of its potential returns per unit of risk. The CIBT Education Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 29.00 in CIBT Education Group on August 31, 2024 and sell it today you would lose (27.56) from holding CIBT Education Group or give up 95.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 86.63% |
| Values | Daily Returns |
Merck Company vs. CIBT Education Group
Performance |
| Timeline |
| Merck Company |
| CIBT Education Group |
Merck and CIBT Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CIBT Education
The main advantage of trading using opposite Merck and CIBT Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CIBT Education 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 CIBT Education will offset losses from the drop in CIBT Education's long position.The idea behind Merck Company and CIBT Education Group 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.| CIBT Education vs. Porsche Automobile Holding | CIBT Education vs. Ferrari NV | CIBT Education vs. Toyota Motor | CIBT Education vs. General Motors |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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