Correlation Between Merck and Organon
Can any of the company-specific risk be diversified away by investing in both Merck and Organon 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 Organon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Organon Co, you can compare the effects of market volatilities on Merck and Organon 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 Organon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Organon.
Diversification Opportunities for Merck and Organon
Almost no diversification
The 3 months correlation between Merck and Organon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Organon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organon 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 Organon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organon has no effect on the direction of Merck i.e., Merck and Organon go up and down completely randomly.
Pair Corralation between Merck and Organon
Considering the 90-day investment horizon Merck Company is expected to under-perform the Organon. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.87 times less risky than Organon. The stock trades about -0.01 of its potential returns per unit of risk. The Organon Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,235 in Organon Co on September 12, 2024 and sell it today you would earn a total of 334.00 from holding Organon Co or generate 27.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Organon Co
Performance |
| Timeline |
| Merck Company |
| Organon |
Merck and Organon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Organon
The main advantage of trading using opposite Merck and Organon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Organon 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 Organon will offset losses from the drop in Organon's long position.| Merck vs. Victory Integrity Smallmid Cap | Merck vs. Hilton Worldwide Holdings | Merck vs. NVIDIA | Merck vs. JPMorgan Chase Co |
| Organon vs. Johnson Johnson | Organon vs. Bristol Myers Squibb | Organon vs. AbbVie Inc | Organon vs. Eli Lilly and |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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