Correlation Between Merck and 23Andme Holding

Can any of the company-specific risk be diversified away by investing in both Merck and 23Andme Holding 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 23Andme Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Merck Company and 23Andme Holding Co, you can compare the effects of market volatilities on Merck and 23Andme Holding 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 23Andme Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 23Andme Holding.

Diversification Opportunities for Merck and 23Andme Holding

-0.22

Correlation Coefficient

Merck  23Andme Holding

Very good diversification

The 3 months correlation between Merck and 23Andme is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and 23Andme Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 23Andme Holding 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 23Andme Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 23Andme Holding has no effect on the direction of Merck i.e., Merck and 23Andme Holding go up and down completely randomly.

Pair Corralation between Merck and 23Andme Holding

Considering the 90-day investment horizon Merck is expected to generate 8.15 times less return on investment than 23Andme Holding. But when comparing it to its historical volatility, Merck Company is 8.36 times less risky than 23Andme Holding. It trades about 0.06 of its potential returns per unit of risk. 23Andme Holding Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  45.00  in 23Andme Holding Co on January 25, 2024 and sell it today you would earn a total of  1.71  from holding 23Andme Holding Co or generate 3.8% return on investment over 90 days.

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

Merck Company  vs.  23Andme Holding Co

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.

23Andme Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 23Andme Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Merck and 23Andme Holding

The main advantage of trading using opposite Merck and 23Andme Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 23Andme Holding 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 23Andme Holding will offset losses from the drop in 23Andme Holding's long position.

The idea behind Merck Company and 23Andme Holding Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.