Correlation Between Medical Properties and Merck
Can any of the company-specific risk be diversified away by investing in both Medical Properties 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 Medical Properties and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Properties Trust and Merck Company, you can compare the effects of market volatilities on Medical Properties 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 Medical Properties with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Properties and Merck.
Diversification Opportunities for Medical Properties and Merck
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Medical and Merck is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Medical Properties Trust and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Medical Properties 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 Medical Properties Trust 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 Medical Properties i.e., Medical Properties and Merck go up and down completely randomly.
Pair Corralation between Medical Properties and Merck
Assuming the 90 days trading horizon Medical Properties Trust is expected to generate 3.46 times more return on investment than Merck. However, Medical Properties is 3.46 times more volatile than Merck Company. It trades about 0.21 of its potential returns per unit of risk. Merck Company is currently generating about -0.06 per unit of risk. If you would invest 398.00 in Medical Properties Trust on November 3, 2024 and sell it today you would earn a total of 74.00 from holding Medical Properties Trust or generate 18.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medical Properties Trust vs. Merck Company
Performance |
| Timeline |
| Medical Properties Trust |
| Merck Company |
Medical Properties and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medical Properties and Merck
The main advantage of trading using opposite Medical Properties and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Properties 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.| Medical Properties vs. Intermediate Capital Group | Medical Properties vs. AcadeMedia AB | Medical Properties vs. China Pacific Insurance | Medical Properties vs. Ecclesiastical Insurance Office |
| Merck vs. Roadside Real Estate | Merck vs. Fresenius Medical Care | Merck vs. EVS Broadcast Equipment | Merck vs. Ondine Biomedical |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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