Correlation Between Merck and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Merck and Algonquin Power 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 Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Algonquin Power Utilities, you can compare the effects of market volatilities on Merck and Algonquin Power 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Algonquin Power.
Diversification Opportunities for Merck and Algonquin Power
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Algonquin is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Merck i.e., Merck and Algonquin Power go up and down completely randomly.
Pair Corralation between Merck and Algonquin Power
Considering the 90-day investment horizon Merck Company is expected to under-perform the Algonquin Power. In addition to that, Merck is 1.26 times more volatile than Algonquin Power Utilities. It trades about 0.0 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.06 per unit of volatility. If you would invest 2,288 in Algonquin Power Utilities on September 4, 2024 and sell it today you would earn a total of 188.00 from holding Algonquin Power Utilities or generate 8.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 30.71% |
| Values | Daily Returns |
Merck Company vs. Algonquin Power Utilities
Performance |
| Timeline |
| Merck Company |
| Algonquin Power Utilities |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Algonquin Power
The main advantage of trading using opposite Merck and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| Merck vs. Crinetics Pharmaceuticals | Merck vs. Enanta Pharmaceuticals | Merck vs. Amicus Therapeutics | Merck vs. Connect Biopharma Holdings |
| Algonquin Power vs. Algonquin Power Utilities | Algonquin Power vs. CMS Energy Corp | Algonquin Power vs. CMS Energy Corp | Algonquin Power vs. Argo Group 65 |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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