Correlation Between Merck and Morningstar Aggressive
Can any of the company-specific risk be diversified away by investing in both Merck and Morningstar Aggressive 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 Morningstar Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Morningstar Aggressive Growth, you can compare the effects of market volatilities on Merck and Morningstar Aggressive 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 Morningstar Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Morningstar Aggressive.
Diversification Opportunities for Merck and Morningstar Aggressive
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Morningstar is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Morningstar Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Aggressive 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 Morningstar Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Aggressive has no effect on the direction of Merck i.e., Merck and Morningstar Aggressive go up and down completely randomly.
Pair Corralation between Merck and Morningstar Aggressive
Considering the 90-day investment horizon Merck Company is expected to under-perform the Morningstar Aggressive. In addition to that, Merck is 1.76 times more volatile than Morningstar Aggressive Growth. It trades about -0.01 of its total potential returns per unit of risk. Morningstar Aggressive Growth is currently generating about 0.1 per unit of volatility. If you would invest 1,244 in Morningstar Aggressive Growth on August 27, 2024 and sell it today you would earn a total of 371.00 from holding Morningstar Aggressive Growth or generate 29.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Morningstar Aggressive Growth
Performance |
| Timeline |
| Merck Company |
| Morningstar Aggressive |
Merck and Morningstar Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Morningstar Aggressive
The main advantage of trading using opposite Merck and Morningstar Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Morningstar Aggressive 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 Morningstar Aggressive will offset losses from the drop in Morningstar Aggressive's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Morningstar Aggressive vs. Vanguard Total Stock | Morningstar Aggressive vs. Vanguard 500 Index | Morningstar Aggressive vs. Vanguard Total Stock | Morningstar Aggressive vs. Vanguard Total Stock |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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