Correlation Between HP and Merck
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Merck Company, you can compare the effects of market volatilities on HP 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 HP with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Merck.
Diversification Opportunities for HP and Merck
Excellent diversification
The 3 months correlation between HP and Merck is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and HP 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 HP 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 HP i.e., HP and Merck go up and down completely randomly.
Pair Corralation between HP and Merck
Considering the 90-day investment horizon HP Inc is expected to under-perform the Merck. In addition to that, HP is 2.31 times more volatile than Merck Company. It trades about -0.02 of its total potential returns per unit of risk. Merck Company is currently generating about 0.0 per unit of volatility. If you would invest 10,188 in Merck Company on September 2, 2024 and sell it today you would lose (24.00) from holding Merck Company or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Merck Company
Performance |
| Timeline |
| HP Inc |
| Merck Company |
HP and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Merck
The main advantage of trading using opposite HP and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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.The idea behind HP Inc and Merck Company 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.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |