Correlation Between Vienna Insurance and Merck
Can any of the company-specific risk be diversified away by investing in both Vienna Insurance 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 Vienna Insurance and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vienna Insurance Group and Merck Company, you can compare the effects of market volatilities on Vienna Insurance 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 Vienna Insurance with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vienna Insurance and Merck.
Diversification Opportunities for Vienna Insurance and Merck
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vienna and Merck is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vienna Insurance Group and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Vienna Insurance 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 Vienna Insurance Group 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 Vienna Insurance i.e., Vienna Insurance and Merck go up and down completely randomly.
Pair Corralation between Vienna Insurance and Merck
Assuming the 90 days trading horizon Vienna Insurance Group is expected to generate 0.77 times more return on investment than Merck. However, Vienna Insurance Group is 1.29 times less risky than Merck. It trades about -0.03 of its potential returns per unit of risk. Merck Company is currently generating about -0.13 per unit of risk. If you would invest 3,030 in Vienna Insurance Group on August 23, 2024 and sell it today you would lose (160.00) from holding Vienna Insurance Group or give up 5.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vienna Insurance Group vs. Merck Company
Performance |
| Timeline |
| Vienna Insurance |
| Merck Company |
Vienna Insurance and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vienna Insurance and Merck
The main advantage of trading using opposite Vienna Insurance and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vienna Insurance 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.| Vienna Insurance vs. Oesterr Post AG | Vienna Insurance vs. Raiffeisen Bank International | Vienna Insurance vs. Voestalpine AG | Vienna Insurance vs. OMV Aktiengesellschaft |
| Merck vs. Vienna Insurance Group | Merck vs. Oberbank AG | Merck vs. Wiener Privatbank SE | Merck vs. CNH Industrial NV |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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