Correlation Between Merck and CF Acquisition
Can any of the company-specific risk be diversified away by investing in both Merck and CF Acquisition 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 CF Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and CF Acquisition IV, you can compare the effects of market volatilities on Merck and CF Acquisition 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 CF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and CF Acquisition.
Diversification Opportunities for Merck and CF Acquisition
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and CFIV is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and CF Acquisition IV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition IV 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 CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition IV has no effect on the direction of Merck i.e., Merck and CF Acquisition go up and down completely randomly.
Pair Corralation between Merck and CF Acquisition
If you would invest (100.00) in CF Acquisition IV on November 27, 2024 and sell it today you would earn a total of 100.00 from holding CF Acquisition IV or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Merck Company vs. CF Acquisition IV
Performance |
| Timeline |
| Merck Company |
| CF Acquisition IV |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Merck and CF Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and CF Acquisition
The main advantage of trading using opposite Merck and CF Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, CF Acquisition 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 CF Acquisition will offset losses from the drop in CF Acquisition's long position.The idea behind Merck Company and CF Acquisition IV 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.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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