Correlation Between KING PHARMACEUTICALS and Merck
Can any of the company-specific risk be diversified away by investing in both KING 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 KING PHARMACEUTICALS and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KING PHARMACEUTICALS INC and Merck Company, you can compare the effects of market volatilities on KING 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 KING PHARMACEUTICALS with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of KING PHARMACEUTICALS and Merck.
Diversification Opportunities for KING PHARMACEUTICALS and Merck
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between KING and Merck is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KING PHARMACEUTICALS INC and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and KING 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 KING PHARMACEUTICALS INC 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 KING PHARMACEUTICALS i.e., KING PHARMACEUTICALS and Merck go up and down completely randomly.
Pair Corralation between KING PHARMACEUTICALS and Merck
Allowing for the 90-day total investment horizon KING PHARMACEUTICALS INC is expected to generate 4.39 times more return on investment than Merck. However, KING PHARMACEUTICALS is 4.39 times more volatile than Merck Company. It trades about 0.03 of its potential returns per unit of risk. Merck Company is currently generating about 0.01 per unit of risk. If you would invest 2,640 in KING PHARMACEUTICALS INC on May 1, 2025 and sell it today you would lose (152.00) from holding KING PHARMACEUTICALS INC or give up 5.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KING PHARMACEUTICALS INC vs. Merck Company
Performance |
| Timeline |
| KING PHARMACEUTICALS INC |
| Merck Company |
KING PHARMACEUTICALS and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KING PHARMACEUTICALS and Merck
The main advantage of trading using opposite KING PHARMACEUTICALS and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KING 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.| KING PHARMACEUTICALS vs. Agilent Technologies | KING PHARMACEUTICALS vs. Equillium | KING PHARMACEUTICALS vs. DiaMedica Therapeutics | KING PHARMACEUTICALS vs. Valneva SE ADR |
| Merck vs. Agilent Technologies | Merck vs. Equillium | Merck vs. KING PHARMACEUTICALS INC | Merck vs. DiaMedica Therapeutics |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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