Correlation Between Merck and Bantek
Can any of the company-specific risk be diversified away by investing in both Merck and Bantek 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 Bantek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Bantek Inc, you can compare the effects of market volatilities on Merck and Bantek 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 Bantek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Bantek.
Diversification Opportunities for Merck and Bantek
Poor diversification
The 3 months correlation between Merck and Bantek is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Bantek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bantek Inc 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 Bantek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bantek Inc has no effect on the direction of Merck i.e., Merck and Bantek go up and down completely randomly.
Pair Corralation between Merck and Bantek
Considering the 90-day investment horizon Merck Company is expected to under-perform the Bantek. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 13.95 times less risky than Bantek. The stock trades about -0.05 of its potential returns per unit of risk. The Bantek Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.15 in Bantek Inc on August 31, 2024 and sell it today you would earn a total of 0.01 from holding Bantek Inc or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Bantek Inc
Performance |
| Timeline |
| Merck Company |
| Bantek Inc |
Merck and Bantek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Bantek
The main advantage of trading using opposite Merck and Bantek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Bantek 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 Bantek will offset losses from the drop in Bantek's long position.The idea behind Merck Company and Bantek Inc 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.| Bantek vs. Rolls Royce Holdings plc | Bantek vs. Byrna Technologies | Bantek vs. Austal Limited | Bantek vs. Astronics |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |