Correlation Between Merck and SNC Lavalin
Can any of the company-specific risk be diversified away by investing in both Merck and SNC Lavalin 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 SNC Lavalin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and SNC Lavalin Group, you can compare the effects of market volatilities on Merck and SNC Lavalin 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 SNC Lavalin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SNC Lavalin.
Diversification Opportunities for Merck and SNC Lavalin
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and SNC is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SNC Lavalin Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNC Lavalin 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 SNC Lavalin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNC Lavalin Group has no effect on the direction of Merck i.e., Merck and SNC Lavalin go up and down completely randomly.
Pair Corralation between Merck and SNC Lavalin
Considering the 90-day investment horizon Merck Company is expected to under-perform the SNC Lavalin. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.09 times less risky than SNC Lavalin. The stock trades about -0.07 of its potential returns per unit of risk. The SNC Lavalin Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,226 in SNC Lavalin Group on October 24, 2024 and sell it today you would earn a total of 24.00 from holding SNC Lavalin Group or generate 0.46% 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. SNC Lavalin Group
Performance |
| Timeline |
| Merck Company |
| SNC Lavalin Group |
Merck and SNC Lavalin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SNC Lavalin
The main advantage of trading using opposite Merck and SNC Lavalin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SNC Lavalin 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 SNC Lavalin will offset losses from the drop in SNC Lavalin's long position.| Merck vs. DiaMedica Therapeutics | Merck vs. Seres Therapeutics | Merck vs. Inhibikase Therapeutics | Merck vs. Oncolytics Biotech |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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