Correlation Between Merck and OKYO Pharma
Can any of the company-specific risk be diversified away by investing in both Merck and OKYO Pharma 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 OKYO Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and OKYO Pharma Ltd, you can compare the effects of market volatilities on Merck and OKYO Pharma 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 OKYO Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and OKYO Pharma.
Diversification Opportunities for Merck and OKYO Pharma
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and OKYO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and OKYO Pharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OKYO Pharma 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 OKYO Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OKYO Pharma has no effect on the direction of Merck i.e., Merck and OKYO Pharma go up and down completely randomly.
Pair Corralation between Merck and OKYO Pharma
Considering the 90-day investment horizon Merck Company is expected to under-perform the OKYO Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 3.8 times less risky than OKYO Pharma. The stock trades about -0.15 of its potential returns per unit of risk. The OKYO Pharma Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 100.00 in OKYO Pharma Ltd on September 13, 2024 and sell it today you would earn a total of 7.00 from holding OKYO Pharma Ltd or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. OKYO Pharma Ltd
Performance |
| Timeline |
| Merck Company |
| OKYO Pharma |
Merck and OKYO Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and OKYO Pharma
The main advantage of trading using opposite Merck and OKYO Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, OKYO Pharma 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 OKYO Pharma will offset losses from the drop in OKYO Pharma's long position.The idea behind Merck Company and OKYO Pharma Ltd 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.| OKYO Pharma vs. Candel Therapeutics | OKYO Pharma vs. Anebulo Pharmaceuticals | OKYO Pharma vs. Cingulate Warrants | OKYO Pharma vs. Unicycive Therapeutics |
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 CEOs Directory module to screen CEOs from public companies around the world.
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