Correlation Between Merck and Champlain Small
Can any of the company-specific risk be diversified away by investing in both Merck and Champlain Small 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 Champlain Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Champlain Small, you can compare the effects of market volatilities on Merck and Champlain Small 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 Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Champlain Small.
Diversification Opportunities for Merck and Champlain Small
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Champlain is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small 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 Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of Merck i.e., Merck and Champlain Small go up and down completely randomly.
Pair Corralation between Merck and Champlain Small
Considering the 90-day investment horizon Merck is expected to generate 187.33 times less return on investment than Champlain Small. In addition to that, Merck is 1.09 times more volatile than Champlain Small. It trades about 0.0 of its total potential returns per unit of risk. Champlain Small is currently generating about 0.05 per unit of volatility. If you would invest 2,012 in Champlain Small on August 31, 2024 and sell it today you would earn a total of 538.00 from holding Champlain Small or generate 26.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Merck Company vs. Champlain Small
Performance |
| Timeline |
| Merck Company |
| Champlain Small |
Merck and Champlain Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Champlain Small
The main advantage of trading using opposite Merck and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Champlain Small 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 Champlain Small will offset losses from the drop in Champlain Small's long position.The idea behind Merck Company and Champlain Small 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.| Champlain Small vs. The Hartford Midcap | Champlain Small vs. Mfs Emerging Markets | Champlain Small vs. Wells Fargo Special | Champlain Small vs. Baron Emerging Markets |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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