Correlation Between Merck and SENSATA
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By analyzing existing cross correlation between Merck Company and SENSATA TECHNOLOGIES INC, you can compare the effects of market volatilities on Merck and SENSATA 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 SENSATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and SENSATA.
Diversification Opportunities for Merck and SENSATA
Very poor diversification
The 3 months correlation between Merck and SENSATA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and SENSATA TECHNOLOGIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SENSATA TECHNOLOGIES INC 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 SENSATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SENSATA TECHNOLOGIES INC has no effect on the direction of Merck i.e., Merck and SENSATA go up and down completely randomly.
Pair Corralation between Merck and SENSATA
Considering the 90-day investment horizon Merck Company is expected to under-perform the SENSATA. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 37.04 times less risky than SENSATA. The stock trades about 0.0 of its potential returns per unit of risk. The SENSATA TECHNOLOGIES INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,308 in SENSATA TECHNOLOGIES INC on August 24, 2024 and sell it today you would earn a total of 312.00 from holding SENSATA TECHNOLOGIES INC or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.16% |
| Values | Daily Returns |
Merck Company vs. SENSATA TECHNOLOGIES INC
Performance |
| Timeline |
| Merck Company |
| SENSATA TECHNOLOGIES INC |
Merck and SENSATA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and SENSATA
The main advantage of trading using opposite Merck and SENSATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, SENSATA 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 SENSATA will offset losses from the drop in SENSATA's long position.The idea behind Merck Company and SENSATA TECHNOLOGIES INC 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.| SENSATA vs. AEP TEX INC | SENSATA vs. US BANK NATIONAL | SENSATA vs. Omega Healthcare Investors | SENSATA vs. Zoom Video Communications |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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