Correlation Between Merck and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Merck and Johnson Johnson 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 Merck and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Johnson Johnson Co, you can compare the effects of market volatilities on Merck and Johnson Johnson 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 Merck with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Johnson Johnson.
Diversification Opportunities for Merck and Johnson Johnson
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Johnson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Johnson Johnson Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Merck 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 Merck Company are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Merck i.e., Merck and Johnson Johnson go up and down completely randomly.
Pair Corralation between Merck and Johnson Johnson
If you would invest 0.00 in Merck Company on August 24, 2024 and sell it today you would earn a total of 0.00 from holding Merck Company or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 1.59% |
| Values | Daily Returns |
Merck Company vs. Johnson Johnson Co
Performance |
| Timeline |
| Merck Company |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Johnson Johnson |
Merck and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Johnson Johnson
The main advantage of trading using opposite Merck and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Merck vs. United States Steel | Merck vs. Telecom Argentina | Merck vs. Compania de Transporte | Merck vs. Agrometal SAI |
| Johnson Johnson vs. Harmony Gold Mining | Johnson Johnson vs. Agrometal SAI | Johnson Johnson vs. Compania de Transporte | Johnson Johnson vs. Telecom Argentina |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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