Correlation Between Salesforce and Merck

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

Diversification Opportunities for Salesforce and Merck

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Salesforce and Merck is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and Merck go up and down completely randomly.

Pair Corralation between Salesforce and Merck

Considering the 90-day investment horizon Salesforce is expected to under-perform the Merck. In addition to that, Salesforce is 2.35 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 0.13 per unit of volatility. If you would invest  7,772  in Merck Company on February 24, 2022 and sell it today you would earn a total of  1,603  from holding Merck Company or generate 20.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Salesforce  vs.  Merck Company

 Performance (%) 
      Timeline 
Salesforce 
Salesforce Performance
0 of 100
Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in June 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Salesforce Price Channel

Merck Company 
Merck Performance
25 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Merck demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Merck Price Channel

Salesforce and Merck Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Salesforce and Merck

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

Merck Company

Pair trading matchups for Merck

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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