Correlation Between Merck and Société Générale
Can any of the company-specific risk be diversified away by investing in both Merck and Société Générale 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 Société Générale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Socit Gnrale Socit, you can compare the effects of market volatilities on Merck and Société Générale 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 Société Générale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Société Générale.
Diversification Opportunities for Merck and Société Générale
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Société is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Socit Gnrale Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit Gnrale Socit 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 Société Générale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit Gnrale Socit has no effect on the direction of Merck i.e., Merck and Société Générale go up and down completely randomly.
Pair Corralation between Merck and Société Générale
Considering the 90-day investment horizon Merck Company is expected to generate 0.53 times more return on investment than Société Générale. However, Merck Company is 1.9 times less risky than Société Générale. It trades about -0.01 of its potential returns per unit of risk. Socit Gnrale Socit is currently generating about -0.04 per unit of risk. If you would invest 10,373 in Merck Company on August 30, 2024 and sell it today you would lose (61.00) from holding Merck Company or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Socit Gnrale Socit
Performance |
| Timeline |
| Merck Company |
| Socit Gnrale Socit |
Merck and Société Générale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Société Générale
The main advantage of trading using opposite Merck and Société Générale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Société Générale 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 Société Générale will offset losses from the drop in Société Générale's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| Société Générale vs. Banco Bradesco SA | Société Générale vs. Itau Unibanco Banco | Société Générale vs. Lloyds Banking Group | Société Générale vs. Deutsche Bank AG |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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