Correlation Between Merck and Atlantic Wind
Can any of the company-specific risk be diversified away by investing in both Merck and Atlantic Wind 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 Atlantic Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Atlantic Wind Solar, you can compare the effects of market volatilities on Merck and Atlantic Wind 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 Atlantic Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Atlantic Wind.
Diversification Opportunities for Merck and Atlantic Wind
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Atlantic is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Atlantic Wind Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Wind Solar 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 Atlantic Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Wind Solar has no effect on the direction of Merck i.e., Merck and Atlantic Wind go up and down completely randomly.
Pair Corralation between Merck and Atlantic Wind
Considering the 90-day investment horizon Merck Company is expected to generate 0.2 times more return on investment than Atlantic Wind. However, Merck Company is 4.95 times less risky than Atlantic Wind. It trades about -0.05 of its potential returns per unit of risk. Atlantic Wind Solar is currently generating about -0.1 per unit of risk. If you would invest 10,483 in Merck Company on August 31, 2024 and sell it today you would lose (171.00) from holding Merck Company or give up 1.63% 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. Atlantic Wind Solar
Performance |
| Timeline |
| Merck Company |
| Atlantic Wind Solar |
Merck and Atlantic Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Atlantic Wind
The main advantage of trading using opposite Merck and Atlantic Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Atlantic Wind 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 Atlantic Wind will offset losses from the drop in Atlantic Wind's long position.The idea behind Merck Company and Atlantic Wind Solar 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.| Atlantic Wind vs. Green Stream Holdings | Atlantic Wind vs. VirExit Technologies | Atlantic Wind vs. Clean Vision Corp | Atlantic Wind vs. SolarWindow Technologies |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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