Correlation Between Merck and Avvax
Can any of the company-specific risk be diversified away by investing in both Merck and Avvax 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 Avvax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Avvax, you can compare the effects of market volatilities on Merck and Avvax 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 Avvax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Avvax.
Diversification Opportunities for Merck and Avvax
Excellent diversification
The 3 months correlation between Merck and Avvax is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Avvax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avvax 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 Avvax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avvax has no effect on the direction of Merck i.e., Merck and Avvax go up and down completely randomly.
Pair Corralation between Merck and Avvax
Considering the 90-day investment horizon Merck Company is expected to under-perform the Avvax. In addition to that, Merck is 2.14 times more volatile than Avvax. It trades about -0.15 of its total potential returns per unit of risk. Avvax is currently generating about 0.07 per unit of volatility. If you would invest 1,188 in Avvax on September 13, 2024 and sell it today you would earn a total of 21.00 from holding Avvax or generate 1.77% 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. Avvax
Performance |
| Timeline |
| Merck Company |
| Avvax |
Merck and Avvax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Avvax
The main advantage of trading using opposite Merck and Avvax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Avvax 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 Avvax will offset losses from the drop in Avvax's long position.The idea behind Merck Company and Avvax 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.| Avvax vs. Calamos Dynamic Convertible | Avvax vs. Fidelity Sai Convertible | Avvax vs. Rationalpier 88 Convertible | Avvax vs. Putnam Convertible Incm Gwth |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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