Correlation Between Baird Aggregate and Merck
Can any of the company-specific risk be diversified away by investing in both Baird Aggregate 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 Baird Aggregate and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baird Aggregate Bond and Merck Company, you can compare the effects of market volatilities on Baird Aggregate 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 Baird Aggregate with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Aggregate and Merck.
Diversification Opportunities for Baird Aggregate and Merck
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Baird and Merck is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Baird Aggregate Bond and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and Baird Aggregate 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 Baird Aggregate Bond 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 Baird Aggregate i.e., Baird Aggregate and Merck go up and down completely randomly.
Pair Corralation between Baird Aggregate and Merck
Assuming the 90 days horizon Baird Aggregate Bond is expected to generate 0.3 times more return on investment than Merck. However, Baird Aggregate Bond is 3.39 times less risky than Merck. It trades about 0.09 of its potential returns per unit of risk. Merck Company is currently generating about -0.02 per unit of risk. If you would invest 1,019 in Baird Aggregate Bond on September 1, 2024 and sell it today you would earn a total of 8.00 from holding Baird Aggregate Bond or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Baird Aggregate Bond vs. Merck Company
Performance |
| Timeline |
| Baird Aggregate Bond |
| Merck Company |
Baird Aggregate and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baird Aggregate and Merck
The main advantage of trading using opposite Baird Aggregate and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Aggregate 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.| Baird Aggregate vs. Metropolitan West Total | Baird Aggregate vs. Mfs Emerging Markets | Baird Aggregate vs. Jpmorgan E Bond | Baird Aggregate vs. Eaton Vance Income |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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