Correlation Between Santen Pharmaceutical and Merck
Can any of the company-specific risk be diversified away by investing in both Santen Pharmaceutical 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 Santen Pharmaceutical and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Santen Pharmaceutical Co and Merck Company, you can compare the effects of market volatilities on Santen Pharmaceutical 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 Santen Pharmaceutical with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santen Pharmaceutical and Merck.
Diversification Opportunities for Santen Pharmaceutical and Merck
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Santen and Merck is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Santen Pharmaceutical Co and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Santen Pharmaceutical 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 Santen Pharmaceutical Co 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 Santen Pharmaceutical i.e., Santen Pharmaceutical and Merck go up and down completely randomly.
Pair Corralation between Santen Pharmaceutical and Merck
Assuming the 90 days horizon Santen Pharmaceutical is expected to generate 11.35 times less return on investment than Merck. In addition to that, Santen Pharmaceutical is 1.67 times more volatile than Merck Company. It trades about 0.0 of its total potential returns per unit of risk. Merck Company is currently generating about 0.06 per unit of volatility. If you would invest 12,531 in Merck Company on January 25, 2024 and sell it today you would earn a total of 185.00 from holding Merck Company or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Santen Pharmaceutical Co vs. Merck Company
Performance |
| Timeline |
| Santen Pharmaceutical |
| Merck Company |
Santen Pharmaceutical and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Santen Pharmaceutical and Merck
The main advantage of trading using opposite Santen Pharmaceutical and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santen Pharmaceutical 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.| Santen Pharmaceutical vs. Santen Pharmaceutical Co | Santen Pharmaceutical vs. GSK plc | Santen Pharmaceutical vs. Grifols SA ADR | Santen Pharmaceutical vs. Pfizer 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 the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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