Correlation Between Merck and Uber Technologies

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

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

Diversification Opportunities for Merck and Uber Technologies

0.47
  Correlation Coefficient
Merck Company
Uber Technologies

Very weak diversification

The 3 months correlation between Merck and Uber Technologies is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Uber Technologies in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Merck i.e., Merck and Uber Technologies go up and down completely randomly.

Pair Corralation between Merck and Uber Technologies

Considering the 90-day investment horizon Merck Company is expected to under-perform the Uber Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.52 times less risky than Uber Technologies. The stock trades about 0.0 of its potential returns per unit of risk. The Uber Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,786  in Uber Technologies on July 28, 2021 and sell it today you would earn a total of  1,816  from holding Uber Technologies or generate 65.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.58%
ValuesDaily Returns

Merck Company  vs.  Uber Technologies

 Performance (%) 
      Timeline 
Merck Company 
 Merck Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Merck is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Merck Price Channel

Uber Technologies 
 Uber Technologies Performance
0 of 100
Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Uber Technologies is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

Uber Technologies Price Channel

Merck and Uber Technologies Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Merck and Uber Technologies

The main advantage of trading using opposite Merck and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.
The idea behind Merck Company and Uber Technologies 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.
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 CEO Directory module to screen CEOs from public companies around the world.

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