Correlation Between Merck and 2023 EFT
Can any of the company-specific risk be diversified away by investing in both Merck and 2023 EFT 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 2023 EFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and 2023 EFT Series, you can compare the effects of market volatilities on Merck and 2023 EFT 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 2023 EFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 2023 EFT.
Diversification Opportunities for Merck and 2023 EFT
Excellent diversification
The 3 months correlation between Merck and 2023 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and 2023 EFT Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2023 EFT Series 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 2023 EFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2023 EFT Series has no effect on the direction of Merck i.e., Merck and 2023 EFT go up and down completely randomly.
Pair Corralation between Merck and 2023 EFT
Considering the 90-day investment horizon Merck Company is expected to under-perform the 2023 EFT. In addition to that, Merck is 1.62 times more volatile than 2023 EFT Series. It trades about -0.11 of its total potential returns per unit of risk. 2023 EFT Series is currently generating about 0.09 per unit of volatility. If you would invest 2,913 in 2023 EFT Series on September 1, 2024 and sell it today you would earn a total of 290.00 from holding 2023 EFT Series or generate 9.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Merck Company vs. 2023 EFT Series
Performance |
| Timeline |
| Merck Company |
| 2023 EFT Series |
Merck and 2023 EFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and 2023 EFT
The main advantage of trading using opposite Merck and 2023 EFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 2023 EFT 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 2023 EFT will offset losses from the drop in 2023 EFT's long position.The idea behind Merck Company and 2023 EFT Series 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.| 2023 EFT vs. Vanguard Small Cap Value | 2023 EFT vs. Dimensional Targeted Value | 2023 EFT vs. SPDR SP 600 | 2023 EFT vs. Avantis Small Cap |
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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