Correlation Between Merck and Alger ETF
Can any of the company-specific risk be diversified away by investing in both Merck and Alger ETF 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 Alger ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The Alger ETF, you can compare the effects of market volatilities on Merck and Alger ETF 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 Alger ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Alger ETF.
Diversification Opportunities for Merck and Alger ETF
Pay attention - limited upside
The 3 months correlation between Merck and Alger is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Alger ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger ETF 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 Alger ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger ETF has no effect on the direction of Merck i.e., Merck and Alger ETF go up and down completely randomly.
Pair Corralation between Merck and Alger ETF
Considering the 90-day investment horizon Merck Company is expected to under-perform the Alger ETF. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.13 times less risky than Alger ETF. The stock trades about -0.03 of its potential returns per unit of risk. The The Alger ETF is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,505 in The Alger ETF on August 29, 2024 and sell it today you would earn a total of 265.00 from holding The Alger ETF or generate 10.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. The Alger ETF
Performance |
| Timeline |
| Merck Company |
| Alger ETF |
Merck and Alger ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Alger ETF
The main advantage of trading using opposite Merck and Alger ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Alger ETF 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 Alger ETF will offset losses from the drop in Alger ETF's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Alger ETF vs. JPMorgan Fundamental Data | Alger ETF vs. Vanguard Mid Cap Index | Alger ETF vs. SPDR SP 400 | Alger ETF vs. SPDR SP 400 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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