Correlation Between Merck and Bond Fund
Can any of the company-specific risk be diversified away by investing in both Merck and Bond Fund 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 Bond Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Bond Fund Of, you can compare the effects of market volatilities on Merck and Bond Fund 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 Bond Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Bond Fund.
Diversification Opportunities for Merck and Bond Fund
Almost no diversification
The 3 months correlation between Merck and Bond is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Bond Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund 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 Bond Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of Merck i.e., Merck and Bond Fund go up and down completely randomly.
Pair Corralation between Merck and Bond Fund
Considering the 90-day investment horizon Merck Company is expected to under-perform the Bond Fund. In addition to that, Merck is 3.75 times more volatile than Bond Fund Of. It trades about -0.02 of its total potential returns per unit of risk. Bond Fund Of is currently generating about 0.08 per unit of volatility. If you would invest 1,128 in Bond Fund Of on September 1, 2024 and sell it today you would earn a total of 7.00 from holding Bond Fund Of or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Bond Fund Of
Performance |
| Timeline |
| Merck Company |
| Bond Fund |
Merck and Bond Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Bond Fund
The main advantage of trading using opposite Merck and Bond Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Bond Fund 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 Bond Fund will offset losses from the drop in Bond Fund's long position.The idea behind Merck Company and Bond Fund Of 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.| Bond Fund vs. American High Income | Bond Fund vs. Europacific Growth Fund | Bond Fund vs. Capital World Bond | Bond Fund vs. Growth Fund Of |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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