Correlation Between GIB Capital and Merck

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

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

Diversification Opportunities for GIB Capital and Merck

-0.48

Correlation Coefficient

GIB Capital  Merck

Very good diversification

The 3 months correlation between GIB and Merck is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding GIB Capital Group and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and GIB Capital 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 GIB Capital Group 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 GIB Capital i.e., GIB Capital and Merck go up and down completely randomly.

Pair Corralation between GIB Capital and Merck

If you would invest  0.06  in GIB Capital Group on January 20, 2024 and sell it today you would earn a total of  0.00  from holding GIB Capital Group or generate 0.0% return on investment over 90 days.

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

GIB Capital Group  vs.  Merck Company

GIB Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GIB Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, GIB Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Merck Company

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Merck is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GIB Capital and Merck

The main advantage of trading using opposite GIB Capital and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GIB Capital 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 GIB Capital Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.