Correlation Between Merck and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Merck and AstraZeneca PLC 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 AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and AstraZeneca PLC ADR, you can compare the effects of market volatilities on Merck and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and AstraZeneca PLC.
Diversification Opportunities for Merck and AstraZeneca PLC
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merck and AstraZeneca is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Merck i.e., Merck and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Merck and AstraZeneca PLC
Considering the 90-day investment horizon Merck is expected to generate 4.56 times less return on investment than AstraZeneca PLC. In addition to that, Merck is 1.24 times more volatile than AstraZeneca PLC ADR. It trades about 0.05 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.3 per unit of volatility. If you would invest 6,586 in AstraZeneca PLC ADR on January 24, 2024 and sell it today you would earn a total of 427.00 from holding AstraZeneca PLC ADR or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. AstraZeneca PLC ADR
Performance |
| Timeline |
| Merck Company |
| AstraZeneca PLC ADR |
Merck and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and AstraZeneca PLC
The main advantage of trading using opposite Merck and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| Merck vs. Silver Spike Investment | Merck vs. Alkermes Plc | Merck vs. Eagle Pharmaceuticals | Merck vs. Evotec SE ADR |
| AstraZeneca PLC vs. Silver Spike Investment | AstraZeneca PLC vs. Alkermes Plc | AstraZeneca PLC vs. Eagle Pharmaceuticals | AstraZeneca PLC vs. Evotec SE ADR |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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