Correlation Between Merck and Invesco Senior
Can any of the company-specific risk be diversified away by investing in both Merck and Invesco Senior 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 Invesco Senior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Invesco Senior Loan, you can compare the effects of market volatilities on Merck and Invesco Senior 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 Invesco Senior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Invesco Senior.
Diversification Opportunities for Merck and Invesco Senior
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Invesco is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Invesco Senior Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Senior Loan 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 Invesco Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Senior Loan has no effect on the direction of Merck i.e., Merck and Invesco Senior go up and down completely randomly.
Pair Corralation between Merck and Invesco Senior
Considering the 90-day investment horizon Merck Company is expected to under-perform the Invesco Senior. In addition to that, Merck is 12.83 times more volatile than Invesco Senior Loan. It trades about -0.02 of its total potential returns per unit of risk. Invesco Senior Loan is currently generating about 0.54 per unit of volatility. If you would invest 2,086 in Invesco Senior Loan on September 1, 2024 and sell it today you would earn a total of 25.00 from holding Invesco Senior Loan or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Invesco Senior Loan
Performance |
| Timeline |
| Merck Company |
| Invesco Senior Loan |
Merck and Invesco Senior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Invesco Senior
The main advantage of trading using opposite Merck and Invesco Senior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Invesco Senior 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 Invesco Senior will offset losses from the drop in Invesco Senior's long position.The idea behind Merck Company and Invesco Senior Loan 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.| Invesco Senior vs. VanEck Vectors Moodys | Invesco Senior vs. BondBloxx ETF Trust | Invesco Senior vs. Vanguard ESG Corporate | Invesco Senior vs. Vanguard Intermediate Term Corporate |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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