Correlation Between VEON and Merck
Can any of the company-specific risk be diversified away by investing in both VEON 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 VEON and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VEON and Merck Company, you can compare the effects of market volatilities on VEON 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 VEON with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of VEON and Merck.
Diversification Opportunities for VEON and Merck
Pay attention - limited upside
The 3 months correlation between VEON and Merck is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding VEON and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and VEON 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 VEON 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 VEON i.e., VEON and Merck go up and down completely randomly.
Pair Corralation between VEON and Merck
Given the investment horizon of 90 days VEON is expected to generate 2.03 times more return on investment than Merck. However, VEON is 2.03 times more volatile than Merck Company. It trades about 0.12 of its potential returns per unit of risk. Merck Company is currently generating about -0.02 per unit of risk. If you would invest 3,199 in VEON on September 1, 2024 and sell it today you would earn a total of 196.00 from holding VEON or generate 6.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VEON vs. Merck Company
Performance |
| Timeline |
| VEON |
| Merck Company |
VEON and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VEON and Merck
The main advantage of trading using opposite VEON and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VEON 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.| VEON vs. TIM Participacoes SA | VEON vs. PLDT Inc ADR | VEON vs. Liberty Broadband Srs | VEON vs. Liberty Broadband Srs |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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