Correlation Between Merck and Avantis International
Can any of the company-specific risk be diversified away by investing in both Merck and Avantis International 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 Avantis International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Avantis International Equity, you can compare the effects of market volatilities on Merck and Avantis International 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 Avantis International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Avantis International.
Diversification Opportunities for Merck and Avantis International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Avantis is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Avantis International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis International 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 Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Merck i.e., Merck and Avantis International go up and down completely randomly.
Pair Corralation between Merck and Avantis International
Considering the 90-day investment horizon Merck Company is expected to under-perform the Avantis International. In addition to that, Merck is 1.49 times more volatile than Avantis International Equity. It trades about -0.16 of its total potential returns per unit of risk. Avantis International Equity is currently generating about -0.02 per unit of volatility. If you would invest 6,497 in Avantis International Equity on September 2, 2024 and sell it today you would lose (82.00) from holding Avantis International Equity or give up 1.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Avantis International Equity
Performance |
| Timeline |
| Merck Company |
| Avantis International |
Merck and Avantis International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Avantis International
The main advantage of trading using opposite Merck and Avantis International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Avantis International 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 Avantis International will offset losses from the drop in Avantis International's long position.The idea behind Merck Company and Avantis International Equity 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.| Avantis International vs. Avantis Emerging Markets | Avantis International vs. Avantis Equity ETF | Avantis International vs. Avantis International Small | Avantis International vs. Avantis Small 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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