Correlation Between Merck and Global X
Can any of the company-specific risk be diversified away by investing in both Merck and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Global X Adaptive, you can compare the effects of market volatilities on Merck and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Global X.
Diversification Opportunities for Merck and Global X
Pay attention - limited upside
The 3 months correlation between Merck and Global is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Global X Adaptive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Adaptive 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Adaptive has no effect on the direction of Merck i.e., Merck and Global X go up and down completely randomly.
Pair Corralation between Merck and Global X
Considering the 90-day investment horizon Merck Company is expected to under-perform the Global X. In addition to that, Merck is 1.95 times more volatile than Global X Adaptive. It trades about -0.11 of its total potential returns per unit of risk. Global X Adaptive is currently generating about 0.14 per unit of volatility. If you would invest 3,925 in Global X Adaptive on September 1, 2024 and sell it today you would earn a total of 570.00 from holding Global X Adaptive or generate 14.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Merck Company vs. Global X Adaptive
Performance |
| Timeline |
| Merck Company |
| Global X Adaptive |
Merck and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Global X
The main advantage of trading using opposite Merck and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.The idea behind Merck Company and Global X Adaptive 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.| Global X vs. Vanguard Mid Cap Value | Global X vs. SPDR SP Dividend | Global X vs. Pacer Cash Cows | Global X vs. iShares SP Mid Cap |
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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