Correlation Between Merck and Yokohama Rubber
Can any of the company-specific risk be diversified away by investing in both Merck and Yokohama Rubber 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 Yokohama Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The Yokohama Rubber, you can compare the effects of market volatilities on Merck and Yokohama Rubber 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 Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Yokohama Rubber.
Diversification Opportunities for Merck and Yokohama Rubber
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Yokohama is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Merck i.e., Merck and Yokohama Rubber go up and down completely randomly.
Pair Corralation between Merck and Yokohama Rubber
Considering the 90-day investment horizon Merck Company is expected to under-perform the Yokohama Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.62 times less risky than Yokohama Rubber. The stock trades about -0.01 of its potential returns per unit of risk. The The Yokohama Rubber is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,177 in The Yokohama Rubber on September 12, 2024 and sell it today you would earn a total of 410.00 from holding The Yokohama Rubber or generate 18.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 42.09% |
| Values | Daily Returns |
Merck Company vs. The Yokohama Rubber
Performance |
| Timeline |
| Merck Company |
| Yokohama Rubber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Yokohama Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Yokohama Rubber
The main advantage of trading using opposite Merck and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Yokohama Rubber 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 Yokohama Rubber will offset losses from the drop in Yokohama Rubber's long position.| Merck vs. Victory Integrity Smallmid Cap | Merck vs. Hilton Worldwide Holdings | Merck vs. NVIDIA | Merck vs. JPMorgan Chase Co |
| Yokohama Rubber vs. BorgWarner | Yokohama Rubber vs. American Axle Manufacturing | Yokohama Rubber vs. Magna International | Yokohama Rubber vs. Dana Inc |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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