Correlation Between GW Pharmaceuticals and Merck

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

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

Diversification Opportunities for GW Pharmaceuticals and Merck

0.0

Correlation Coefficient

GW Pharmaceuticals  Merck

Pay attention - limited upside

The 3 months correlation between GWPH and Merck is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GW Pharmaceuticals Plc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and GW Pharmaceuticals 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 GW Pharmaceuticals Plc 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 GW Pharmaceuticals i.e., GW Pharmaceuticals and Merck go up and down completely randomly.

Pair Corralation between GW Pharmaceuticals and Merck

If you would invest  12,656  in Merck Company on February 6, 2024 and sell it today you would earn a total of  95.00  from holding Merck Company or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

GW Pharmaceuticals Plc  vs.  Merck Company

GW Pharmaceuticals Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GW Pharmaceuticals Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, GW Pharmaceuticals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Merck Company

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 1 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GW Pharmaceuticals and Merck

The main advantage of trading using opposite GW Pharmaceuticals and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GW Pharmaceuticals 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 GW Pharmaceuticals Plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.