Correlation Between Grifols SA and Merck
Can any of the company-specific risk be diversified away by investing in both Grifols SA 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 Grifols SA and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grifols SA ADR and Merck Company, you can compare the effects of market volatilities on Grifols SA 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 Grifols SA with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grifols SA and Merck.
Diversification Opportunities for Grifols SA and Merck
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Grifols and Merck is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Grifols SA ADR and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Grifols SA 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 Grifols SA ADR 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 Grifols SA i.e., Grifols SA and Merck go up and down completely randomly.
Pair Corralation between Grifols SA and Merck
Given the investment horizon of 90 days Grifols SA ADR is expected to under-perform the Merck. In addition to that, Grifols SA is 1.69 times more volatile than Merck Company. It trades about -0.02 of its total potential returns per unit of risk. Merck Company is currently generating about 0.14 per unit of volatility. If you would invest 12,552 in Merck Company on January 26, 2024 and sell it today you would earn a total of 520.00 from holding Merck Company or generate 4.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Grifols SA ADR vs. Merck Company
Performance |
Timeline |
Grifols SA ADR |
Merck Company |
Grifols SA and Merck Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Grifols SA and Merck
The main advantage of trading using opposite Grifols SA and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grifols SA 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.Grifols SA vs. Terns Pharmaceuticals | Grifols SA vs. Amylyx Pharmaceuticals | Grifols SA vs. Acumen Pharmaceuticals |
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 the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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