Correlation Between Merck and Rank Group
Can any of the company-specific risk be diversified away by investing in both Merck and Rank Group 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 Rank Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The Rank Group, you can compare the effects of market volatilities on Merck and Rank Group 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 Rank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Rank Group.
Diversification Opportunities for Merck and Rank Group
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Rank is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Rank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rank Group 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 Rank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rank Group has no effect on the direction of Merck i.e., Merck and Rank Group go up and down completely randomly.
Pair Corralation between Merck and Rank Group
Considering the 90-day investment horizon Merck Company is expected to under-perform the Rank Group. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.42 times less risky than Rank Group. The stock trades about -0.12 of its potential returns per unit of risk. The The Rank Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 85.00 in The Rank Group on September 3, 2024 and sell it today you would earn a total of 15.00 from holding The Rank Group or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. The Rank Group
Performance |
| Timeline |
| Merck Company |
| Rank Group |
Merck and Rank Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Rank Group
The main advantage of trading using opposite Merck and Rank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Rank Group 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 Rank Group will offset losses from the drop in Rank Group's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Rank Group vs. Victorias Secret Co | Rank Group vs. Acco Brands | Rank Group vs. 51Talk Online Education | Rank Group vs. Shoe Carnival |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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