Correlation Between Merck and SANDS
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By analyzing existing cross correlation between Merck Company and SANDS CHINA LTD, you can compare the effects of market volatilities on Merck and SANDS 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 SANDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SANDS.
Diversification Opportunities for Merck and SANDS
Poor diversification
The 3 months correlation between Merck and SANDS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SANDS CHINA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANDS CHINA LTD 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 SANDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANDS CHINA LTD has no effect on the direction of Merck i.e., Merck and SANDS go up and down completely randomly.
Pair Corralation between Merck and SANDS
Considering the 90-day investment horizon Merck Company is expected to under-perform the SANDS. In addition to that, Merck is 3.89 times more volatile than SANDS CHINA LTD. It trades about -0.23 of its total potential returns per unit of risk. SANDS CHINA LTD is currently generating about -0.25 per unit of volatility. If you would invest 9,992 in SANDS CHINA LTD on August 25, 2024 and sell it today you would lose (169.00) from holding SANDS CHINA LTD or give up 1.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. SANDS CHINA LTD
Performance |
| Timeline |
| Merck Company |
| SANDS CHINA LTD |
Merck and SANDS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SANDS
The main advantage of trading using opposite Merck and SANDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SANDS 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 SANDS will offset losses from the drop in SANDS's long position.The idea behind Merck Company and SANDS CHINA LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SANDS vs. Ultra Clean Holdings | SANDS vs. SunOpta | SANDS vs. FitLife Brands, Common | SANDS vs. National Beverage Corp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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