Correlation Between Penta Ocean and Merck
Can any of the company-specific risk be diversified away by investing in both Penta Ocean and Merck 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 Penta Ocean and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penta Ocean Construction Co and Merck Company, you can compare the effects of market volatilities on Penta Ocean and Merck 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 Penta Ocean with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Merck.
Diversification Opportunities for Penta Ocean and Merck
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Penta and Merck is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Penta Ocean i.e., Penta Ocean and Merck go up and down completely randomly.
Pair Corralation between Penta Ocean and Merck
Assuming the 90 days horizon Penta Ocean is expected to generate 7.1 times less return on investment than Merck. But when comparing it to its historical volatility, Penta Ocean Construction Co is 1.33 times less risky than Merck. It trades about 0.03 of its potential returns per unit of risk. Merck Company is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 13,950 in Merck Company on October 25, 2024 and sell it today you would earn a total of 580.00 from holding Merck Company or generate 4.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penta Ocean Construction Co vs. Merck Company
Performance |
| Timeline |
| Penta Ocean Construc |
| Merck Company |
Penta Ocean and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penta Ocean and Merck
The main advantage of trading using opposite Penta Ocean and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Penta Ocean vs. SUN LIFE FINANCIAL | Penta Ocean vs. Erste Group Bank | Penta Ocean vs. Synovus Financial Corp | Penta Ocean vs. REVO INSURANCE SPA |
| Merck vs. KIMBALL ELECTRONICS | Merck vs. Insurance Australia Group | Merck vs. Nanjing Panda Electronics | Merck vs. Vienna Insurance Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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