Correlation Between Merck and Avient Corp
Can any of the company-specific risk be diversified away by investing in both Merck and Avient Corp 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 Avient Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Avient Corp, you can compare the effects of market volatilities on Merck and Avient Corp 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 Avient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Avient Corp.
Diversification Opportunities for Merck and Avient Corp
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Avient is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Merck i.e., Merck and Avient Corp go up and down completely randomly.
Pair Corralation between Merck and Avient Corp
Considering the 90-day investment horizon Merck Company is expected to generate 1.07 times more return on investment than Avient Corp. However, Merck is 1.07 times more volatile than Avient Corp. It trades about 0.08 of its potential returns per unit of risk. Avient Corp is currently generating about -0.17 per unit of risk. If you would invest 9,858 in Merck Company on September 13, 2024 and sell it today you would earn a total of 203.00 from holding Merck Company or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Avient Corp
Performance |
| Timeline |
| Merck Company |
| Avient Corp |
Merck and Avient Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Avient Corp
The main advantage of trading using opposite Merck and Avient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Avient Corp 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 Avient Corp will offset losses from the drop in Avient Corp's long position.The idea behind Merck Company and Avient Corp 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.| Avient Corp vs. Axalta Coating Systems | Avient Corp vs. H B Fuller | Avient Corp vs. Quaker Chemical | Avient Corp vs. Cabot |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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