Correlation Between Ardelyx and Merck

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

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

Diversification Opportunities for Ardelyx and Merck

-0.27

Correlation Coefficient

Ardelyx  Merck

Very good diversification

The 3 months correlation between Ardelyx and Merck is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ardelyx and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Ardelyx 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 Ardelyx 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 Ardelyx i.e., Ardelyx and Merck go up and down completely randomly.

Pair Corralation between Ardelyx and Merck

Given the investment horizon of 90 days Ardelyx is expected to under-perform the Merck. In addition to that, Ardelyx is 3.04 times more volatile than Merck Company. It trades about -0.14 of its total potential returns per unit of risk. Merck Company is currently generating about 0.1 per unit of volatility. If you would invest  11,937  in Merck Company on January 25, 2024 and sell it today you would earn a total of  751.00  from holding Merck Company or generate 6.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ardelyx  vs.  Merck Company

Ardelyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardelyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Merck Company

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Ardelyx and Merck

The main advantage of trading using opposite Ardelyx and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ardelyx 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.

The idea behind Ardelyx and Merck Company 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.