Correlation Between VanEck India and Merck

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

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

Diversification Opportunities for VanEck India and Merck

0.62

Correlation Coefficient

VanEck India  Merck

Poor diversification

The 3 months correlation between VanEck and Merck is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding VanEck India Growth and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and VanEck India 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 VanEck India Growth 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 VanEck India i.e., VanEck India and Merck go up and down completely randomly.

Pair Corralation between VanEck India and Merck

Given the investment horizon of 90 days VanEck India Growth is expected to generate 0.82 times more return on investment than Merck. However, VanEck India Growth is 1.22 times less risky than Merck. It trades about 0.11 of its potential returns per unit of risk. Merck Company is currently generating about 0.07 per unit of risk. If you would invest  2,992  in VanEck India Growth on January 25, 2024 and sell it today you would earn a total of  1,730  from holding VanEck India Growth or generate 57.82% return on investment over 90 days.

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

VanEck India Growth  vs.  Merck Company

VanEck India Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck India Growth are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, VanEck India is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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 abnormal basic indicators, Merck may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with VanEck India and Merck

The main advantage of trading using opposite VanEck India and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck India 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 VanEck India Growth 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.