Correlation Between Merck and Ambev SA

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

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

Diversification Opportunities for Merck and Ambev SA

0.61

Correlation Coefficient

Merck  Ambev SA

Poor diversification

The 3 months correlation between Merck and Ambev is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Merck i.e., Merck and Ambev SA go up and down completely randomly.

Pair Corralation between Merck and Ambev SA

Assuming the 90 days trading horizon Merck Company is expected to generate 1.57 times more return on investment than Ambev SA. However, Merck is 1.57 times more volatile than Ambev SA. It trades about 0.08 of its potential returns per unit of risk. Ambev SA is currently generating about 0.04 per unit of risk. If you would invest  1,883,725  in Merck Company on April 24, 2025 and sell it today you would earn a total of  186,275  from holding Merck Company or generate 9.89% return on investment over 90 days.

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

Merck Company  vs.  Ambev SA

Merck Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merck Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Merck may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Ambev SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and Ambev SA

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

The idea behind Merck Company and Ambev SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.