Correlation Between Merck and American Acquisition
Can any of the company-specific risk be diversified away by investing in both Merck and American Acquisition 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 American Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and American Acquisition Opportunity, you can compare the effects of market volatilities on Merck and American Acquisition 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 American Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and American Acquisition.
Diversification Opportunities for Merck and American Acquisition
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and American Acquisition Opportuni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Acquisition 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 American Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Acquisition has no effect on the direction of Merck i.e., Merck and American Acquisition go up and down completely randomly.
Pair Corralation between Merck and American Acquisition
If you would invest 10,402 in Merck Company on August 29, 2024 and sell it today you would lose (90.00) from holding Merck Company or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 0.32% |
| Values | Daily Returns |
Merck Company vs. American Acquisition Opportuni
Performance |
| Timeline |
| Merck Company |
| American Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and American Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and American Acquisition
The main advantage of trading using opposite Merck and American Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, American Acquisition 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 American Acquisition will offset losses from the drop in American Acquisition's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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