Correlation Between Merck and Global Cord

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

Diversification Opportunities for Merck and Global Cord

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Merck and Global is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Global Cord Blood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Cord Blood 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 Global Cord. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Cord Blood has no effect on the direction of Merck i.e., Merck and Global Cord go up and down completely randomly.

Pair Corralation between Merck and Global Cord

Considering the 90-day investment horizon Merck Company is expected to under-perform the Global Cord. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 5.83 times less risky than Global Cord. The stock trades about -0.04 of its potential returns per unit of risk. The Global Cord Blood is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Global Cord Blood on July 2, 2022 and sell it today you would earn a total of  71.00  from holding Global Cord Blood or generate 31.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy97.73%
ValuesDaily Returns

Merck Company  vs.  Global Cord Blood

 Performance (%) 
       Timeline  
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 conflicting 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

Global Cord Blood 
Global Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Global Cord Blood are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Global Cord may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Global Price Channel

Merck and Global Cord Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Global Cord

The main advantage of trading using opposite Merck and Global Cord positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Global Cord 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 Global Cord will offset losses from the drop in Global Cord's long position.
Merck vs. Amazon Inc
The idea behind Merck Company and Global Cord Blood 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.
Global Cord vs. Amazon 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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