Correlation Between Merck and Ono Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Merck and Ono Pharmaceutical 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 Ono Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Ono Pharmaceutical Co, you can compare the effects of market volatilities on Merck and Ono Pharmaceutical 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 Ono Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Ono Pharmaceutical.
Diversification Opportunities for Merck and Ono Pharmaceutical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Ono is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ono Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ono Pharmaceutical 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 Ono Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ono Pharmaceutical has no effect on the direction of Merck i.e., Merck and Ono Pharmaceutical go up and down completely randomly.
Pair Corralation between Merck and Ono Pharmaceutical
Considering the 90-day investment horizon Merck Company is expected to generate 0.58 times more return on investment than Ono Pharmaceutical. However, Merck Company is 1.73 times less risky than Ono Pharmaceutical. It trades about -0.18 of its potential returns per unit of risk. Ono Pharmaceutical Co is currently generating about -0.24 per unit of risk. If you would invest 10,423 in Merck Company on August 27, 2024 and sell it today you would lose (505.00) from holding Merck Company or give up 4.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Ono Pharmaceutical Co
Performance |
| Timeline |
| Merck Company |
| Ono Pharmaceutical |
Merck and Ono Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Ono Pharmaceutical
The main advantage of trading using opposite Merck and Ono Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Ono Pharmaceutical 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 Ono Pharmaceutical will offset losses from the drop in Ono Pharmaceutical's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Ono Pharmaceutical vs. Santen Pharmaceutical Co | Ono Pharmaceutical vs. GSK plc | Ono Pharmaceutical vs. Grifols SA ADR | Ono Pharmaceutical vs. Pfizer Inc |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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