Correlation Between Merck and Roche Holding
Can any of the company-specific risk be diversified away by investing in both Merck and Roche Holding 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 Roche Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Roche Holding Ltd, you can compare the effects of market volatilities on Merck and Roche Holding 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 Roche Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Roche Holding.
Diversification Opportunities for Merck and Roche Holding
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Roche is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Merck i.e., Merck and Roche Holding go up and down completely randomly.
Pair Corralation between Merck and Roche Holding
Considering the 90-day investment horizon Merck Company is expected to generate 0.94 times more return on investment than Roche Holding. However, Merck Company is 1.06 times less risky than Roche Holding. It trades about 0.0 of its potential returns per unit of risk. Roche Holding Ltd is currently generating about 0.0 per unit of risk. If you would invest 10,434 in Merck Company on August 23, 2024 and sell it today you would lose (448.00) from holding Merck Company or give up 4.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Merck Company vs. Roche Holding Ltd
Performance |
| Timeline |
| Merck Company |
| Roche Holding |
Merck and Roche Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Roche Holding
The main advantage of trading using opposite Merck and Roche Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Roche Holding 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 Roche Holding will offset losses from the drop in Roche Holding's long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
| Roche Holding vs. Sanofi ADR | Roche Holding vs. AstraZeneca PLC ADR | Roche Holding vs. GlaxoSmithKline PLC ADR | Roche Holding vs. Merck Company |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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