Correlation Between Royal Bank and Merck
Can any of the company-specific risk be diversified away by investing in both Royal Bank 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 Royal Bank and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Merck Company, you can compare the effects of market volatilities on Royal Bank 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 Royal Bank with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Merck.
Diversification Opportunities for Royal Bank and Merck
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Royal and Merck is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Merck go up and down completely randomly.
Pair Corralation between Royal Bank and Merck
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.35 times more return on investment than Merck. However, Royal Bank of is 2.85 times less risky than Merck. It trades about 0.14 of its potential returns per unit of risk. Merck Company is currently generating about 0.02 per unit of risk. If you would invest 8,485 in Royal Bank of on September 14, 2024 and sell it today you would earn a total of 4,036 from holding Royal Bank of or generate 47.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Royal Bank of vs. Merck Company
Performance |
| Timeline |
| Royal Bank |
| Merck Company |
Royal Bank and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Merck
The main advantage of trading using opposite Royal Bank and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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.| Royal Bank vs. Gaztransport et Technigaz | Royal Bank vs. CNH Industrial NV | Royal Bank vs. McEwen Mining | Royal Bank vs. GreenX Metals |
| Merck vs. Ironveld Plc | Merck vs. Discover Financial Services | Merck vs. Baker Steel Resources | Merck vs. Royal Bank of |
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 Stocks Directory module to find actively traded stocks across global markets.
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