Correlation Between Merck and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both Merck and Advanced Micro 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 Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Advanced Micro Devices, you can compare the effects of market volatilities on Merck and Advanced Micro 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 Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Advanced Micro.
Diversification Opportunities for Merck and Advanced Micro
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merck and Advanced is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Merck i.e., Merck and Advanced Micro go up and down completely randomly.
Pair Corralation between Merck and Advanced Micro
Assuming the 90 days trading horizon Merck Company is expected to generate 0.58 times more return on investment than Advanced Micro. However, Merck Company is 1.71 times less risky than Advanced Micro. It trades about -0.07 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.19 per unit of risk. If you would invest 208,812 in Merck Company on August 27, 2024 and sell it today you would lose (6,040) from holding Merck Company or give up 2.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Advanced Micro Devices
Performance |
| Timeline |
| Merck Company |
| Advanced Micro Devices |
Merck and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Advanced Micro
The main advantage of trading using opposite Merck and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.| Merck vs. FIBRA Storage | Merck vs. Micron Technology | Merck vs. Verizon Communications | Merck vs. Southern Copper |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |