Correlation Between JD and Merck
Can any of the company-specific risk be diversified away by investing in both JD 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 JD and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Inc and Merck Company, you can compare the effects of market volatilities on JD 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 JD with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Merck.
Diversification Opportunities for JD and Merck
Very good diversification
The 3 months correlation between JD and Merck is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and JD 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 JD 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 JD i.e., JD and Merck go up and down completely randomly.
Pair Corralation between JD and Merck
Assuming the 90 days horizon JD Inc is expected to generate 0.98 times more return on investment than Merck. However, JD Inc is 1.03 times less risky than Merck. It trades about 0.1 of its potential returns per unit of risk. Merck Company is currently generating about -0.37 per unit of risk. If you would invest 3,740 in JD Inc on November 18, 2024 and sell it today you would earn a total of 195.00 from holding JD Inc or generate 5.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc vs. Merck Company
Performance |
| Timeline |
| JD Inc |
| Merck Company |
JD and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Merck
The main advantage of trading using opposite JD and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD 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 JD 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.| Merck vs. SBM Offshore NV | Merck vs. Vienna Insurance Group | Merck vs. UNIQA Insurance Group | Merck vs. Oberbank AG |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |