Correlation Between Merck and Altaba

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

Diversification Opportunities for Merck and Altaba

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Merck and Altaba is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Altaba Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altaba Inc 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 Altaba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altaba Inc has no effect on the direction of Merck i.e., Merck and Altaba go up and down completely randomly.

Pair Corralation between Merck and Altaba

If you would invest  8,285  in Merck Company on December 29, 2023 and sell it today you would earn a total of  4,910  from holding Merck Company or generate 59.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.2%
ValuesDaily Returns

Merck Company  vs.  Altaba Inc

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

21 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, Merck disclosed solid returns over the last few months and may actually be approaching a breakup point.
Altaba Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Altaba Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Altaba is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Merck and Altaba Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and Altaba

The main advantage of trading using opposite Merck and Altaba positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Altaba 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 Altaba will offset losses from the drop in Altaba's long position.
The idea behind Merck Company and Altaba Inc 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.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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