Correlation Between Merck and ACGR
Can any of the company-specific risk be diversified away by investing in both Merck and ACGR 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 ACGR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ACGR, you can compare the effects of market volatilities on Merck and ACGR 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 ACGR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ACGR.
Diversification Opportunities for Merck and ACGR
Average diversification
The 3 months correlation between Merck and ACGR is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ACGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACGR 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 ACGR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACGR has no effect on the direction of Merck i.e., Merck and ACGR go up and down completely randomly.
Pair Corralation between Merck and ACGR
Considering the 90-day investment horizon Merck Company is expected to under-perform the ACGR. In addition to that, Merck is 1.03 times more volatile than ACGR. It trades about -0.18 of its total potential returns per unit of risk. ACGR is currently generating about -0.01 per unit of volatility. If you would invest 5,981 in ACGR on October 25, 2024 and sell it today you would lose (24.00) from holding ACGR or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. ACGR
Performance |
| Timeline |
| Merck Company |
| ACGR |
Merck and ACGR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ACGR
The main advantage of trading using opposite Merck and ACGR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ACGR 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 ACGR will offset losses from the drop in ACGR's long position.The idea behind Merck Company and ACGR 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.| ACGR vs. FT Vest Equity | ACGR vs. Northern Lights | ACGR vs. Dimensional International High | ACGR vs. First Trust Exchange Traded |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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