Correlation Between Merck and SwissCom
Can any of the company-specific risk be diversified away by investing in both Merck and SwissCom 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 SwissCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SwissCom AG, you can compare the effects of market volatilities on Merck and SwissCom 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 SwissCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SwissCom.
Diversification Opportunities for Merck and SwissCom
Poor diversification
The 3 months correlation between Merck and SwissCom is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SwissCom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SwissCom AG 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 SwissCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SwissCom AG has no effect on the direction of Merck i.e., Merck and SwissCom go up and down completely randomly.
Pair Corralation between Merck and SwissCom
Considering the 90-day investment horizon Merck Company is expected to under-perform the SwissCom. In addition to that, Merck is 1.06 times more volatile than SwissCom AG. It trades about -0.18 of its total potential returns per unit of risk. SwissCom AG is currently generating about -0.12 per unit of volatility. If you would invest 6,305 in SwissCom AG on August 29, 2024 and sell it today you would lose (520.00) from holding SwissCom AG or give up 8.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Merck Company vs. SwissCom AG
Performance |
| Timeline |
| Merck Company |
| SwissCom AG |
Merck and SwissCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SwissCom
The main advantage of trading using opposite Merck and SwissCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SwissCom 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 SwissCom will offset losses from the drop in SwissCom's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| SwissCom vs. Bank Rakyat | SwissCom vs. PT Bank Rakyat | SwissCom vs. Samsung Electronics Co | SwissCom vs. Bank Mandiri Persero |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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