Correlation Between Merck and Genpact

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

Diversification Opportunities for Merck and Genpact

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Merck and Genpact is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Genpact in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genpact 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 Genpact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genpact has no effect on the direction of Merck i.e., Merck and Genpact go up and down completely randomly.

Pair Corralation between Merck and Genpact

Considering the 90-day investment horizon Merck Company is expected to generate 0.89 times more return on investment than Genpact. However, Merck Company is 1.13 times less risky than Genpact. It trades about 0.03 of its potential returns per unit of risk. Genpact is currently generating about 0.02 per unit of risk. If you would invest  7,238  in Merck Company on June 27, 2022 and sell it today you would earn a total of  1,440  from holding Merck Company or generate 19.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Merck Company  vs.  Genpact

 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 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

Genpact 
Genpact Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Genpact are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Genpact is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Genpact Price Channel

Merck and Genpact Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Genpact

The main advantage of trading using opposite Merck and Genpact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Genpact 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 Genpact will offset losses from the drop in Genpact's long position.
Merck vs. Sigma Lithium Corp
The idea behind Merck Company and Genpact 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.
Genpact vs. Industrias Bachoco SA
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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