Correlation Between Merck and Capital Group
Can any of the company-specific risk be diversified away by investing in both Merck and Capital Group 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 Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Capital Group Core, you can compare the effects of market volatilities on Merck and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Capital Group.
Diversification Opportunities for Merck and Capital Group
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Capital is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Capital Group Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Core 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Core has no effect on the direction of Merck i.e., Merck and Capital Group go up and down completely randomly.
Pair Corralation between Merck and Capital Group
Considering the 90-day investment horizon Merck Company is expected to under-perform the Capital Group. In addition to that, Merck is 2.25 times more volatile than Capital Group Core. It trades about -0.16 of its total potential returns per unit of risk. Capital Group Core is currently generating about 0.15 per unit of volatility. If you would invest 3,094 in Capital Group Core on September 3, 2024 and sell it today you would earn a total of 102.00 from holding Capital Group Core or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Capital Group Core
Performance |
| Timeline |
| Merck Company |
| Capital Group Core |
Merck and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Capital Group
The main advantage of trading using opposite Merck and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Capital Group vs. First Trust Multi Asset | Capital Group vs. Collaborative Investment Series | Capital Group vs. EA Series Trust | Capital Group vs. Ocean Park International |
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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