Correlation Between Merck and Pason Systems
Can any of the company-specific risk be diversified away by investing in both Merck and Pason Systems 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 Pason Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Pason Systems, you can compare the effects of market volatilities on Merck and Pason Systems 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 Pason Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Pason Systems.
Diversification Opportunities for Merck and Pason Systems
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Pason is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Pason Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pason Systems 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 Pason Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pason Systems has no effect on the direction of Merck i.e., Merck and Pason Systems go up and down completely randomly.
Pair Corralation between Merck and Pason Systems
Considering the 90-day investment horizon Merck Company is expected to under-perform the Pason Systems. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.53 times less risky than Pason Systems. The stock trades about 0.0 of its potential returns per unit of risk. The Pason Systems is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,144 in Pason Systems on September 3, 2024 and sell it today you would lose (129.00) from holding Pason Systems or give up 11.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.41% |
| Values | Daily Returns |
Merck Company vs. Pason Systems
Performance |
| Timeline |
| Merck Company |
| Pason Systems |
Merck and Pason Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Pason Systems
The main advantage of trading using opposite Merck and Pason Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Pason Systems 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 Pason Systems will offset losses from the drop in Pason Systems' long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Pason Systems vs. Koil Energy Solutions | Pason Systems vs. TerraVest Industries | Pason Systems vs. Enterprise Group | Pason Systems vs. Source Energy Services |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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