Correlation Between Gsk Plc and Merck

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Can any of the company-specific risk be diversified away by investing in both Gsk Plc 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 Gsk Plc and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gsk Plc ADR and Merck Company, you can compare the effects of market volatilities on Gsk Plc 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 Gsk Plc with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gsk Plc and Merck.

Diversification Opportunities for Gsk Plc and Merck

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Gsk Plc and Merck is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gsk Plc ADR and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Gsk Plc 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 Gsk Plc ADR 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 Gsk Plc i.e., Gsk Plc and Merck go up and down completely randomly.

Pair Corralation between Gsk Plc and Merck

Considering the 90-day investment horizon Gsk Plc ADR is expected to under-perform the Merck. In addition to that, Gsk Plc is 1.01 times more volatile than Merck Company. It trades about -0.02 of its total potential returns per unit of risk. Merck Company is currently generating about 0.03 per unit of volatility. If you would invest  7,419  in Merck Company on June 26, 2022 and sell it today you would earn a total of  1,259  from holding Merck Company or generate 16.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Gsk Plc ADR  vs.  Merck Company

 Performance (%) 
       Timeline  
Gsk Plc ADR 
Gsk Plc Performance
0 of 100
Over the last 90 days Gsk Plc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in October 2022. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Gsk Plc Price Channel

Merck Company 
Merck Performance
0 of 100
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Merck Price Channel

Gsk Plc and Merck Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gsk Plc and Merck

The main advantage of trading using opposite Gsk Plc and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gsk Plc 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.
Gsk Plc vs. Sigma Lithium Corp
The idea behind Gsk Plc ADR and Merck Company 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.
Merck vs. Sigma Lithium Corp
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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