Correlation Between Merck and Onex Corp
Can any of the company-specific risk be diversified away by investing in both Merck and Onex Corp 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 Onex Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Onex Corp, you can compare the effects of market volatilities on Merck and Onex Corp 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 Onex Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Onex Corp.
Diversification Opportunities for Merck and Onex Corp
Pay attention - limited upside
The 3 months correlation between Merck and Onex is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Onex Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onex Corp 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 Onex Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onex Corp has no effect on the direction of Merck i.e., Merck and Onex Corp go up and down completely randomly.
Pair Corralation between Merck and Onex Corp
Considering the 90-day investment horizon Merck Company is expected to under-perform the Onex Corp. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.56 times less risky than Onex Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Onex Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 7,235 in Onex Corp on September 1, 2024 and sell it today you would earn a total of 912.00 from holding Onex Corp or generate 12.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Onex Corp
Performance |
| Timeline |
| Merck Company |
| Onex Corp |
Merck and Onex Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Onex Corp
The main advantage of trading using opposite Merck and Onex Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Onex Corp 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 Onex Corp will offset losses from the drop in Onex Corp's long position.The idea behind Merck Company and Onex Corp 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.| Onex Corp vs. Cohen Steers | Onex Corp vs. Artisan Partners Asset | Onex Corp vs. Principal Financial Group | Onex Corp vs. Invesco Plc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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