Correlation Between Merck and Astro Communications

Can any of the company-specific risk be diversified away by investing in both Merck and Astro Communications 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 Astro Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and Astro Communications, you can compare the effects of market volatilities on Merck and Astro Communications 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 Astro Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Astro Communications.

Diversification Opportunities for Merck and Astro Communications

0.0

Correlation Coefficient

Merck  Astro Communications

Pay attention - limited upside

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

Pair Corralation between Merck and Astro Communications

If you would invest  8,327  in Merck Company on September 7, 2025 and sell it today you would earn a total of  1,645  from holding Merck Company or generate 19.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Merck Company  vs.  Astro Communications

Merck Company

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Merck disclosed solid returns over the last few months and may actually be approaching a breakup point.

Astro Communications

Risk-Adjusted Performance

Weakest

Over the last 90 days Astro Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Astro Communications is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Merck and Astro Communications

The main advantage of trading using opposite Merck and Astro Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Astro Communications 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 Astro Communications will offset losses from the drop in Astro Communications' long position.

The idea behind Merck Company and Astro Communications 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.