Correlation Between Merck and Future Scholar
Can any of the company-specific risk be diversified away by investing in both Merck and Future Scholar 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 Future Scholar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Future Scholar 529, you can compare the effects of market volatilities on Merck and Future Scholar 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 Future Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Future Scholar.
Diversification Opportunities for Merck and Future Scholar
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Future is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Future Scholar 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Scholar 529 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 Future Scholar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Scholar 529 has no effect on the direction of Merck i.e., Merck and Future Scholar go up and down completely randomly.
Pair Corralation between Merck and Future Scholar
Considering the 90-day investment horizon Merck is expected to generate 7.81 times less return on investment than Future Scholar. In addition to that, Merck is 2.04 times more volatile than Future Scholar 529. It trades about 0.01 of its total potential returns per unit of risk. Future Scholar 529 is currently generating about 0.09 per unit of volatility. If you would invest 1,615 in Future Scholar 529 on September 1, 2024 and sell it today you would earn a total of 468.00 from holding Future Scholar 529 or generate 28.98% 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. Future Scholar 529
Performance |
| Timeline |
| Merck Company |
| Future Scholar 529 |
Merck and Future Scholar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Future Scholar
The main advantage of trading using opposite Merck and Future Scholar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Future Scholar 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 Future Scholar will offset losses from the drop in Future Scholar's long position.The idea behind Merck Company and Future Scholar 529 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.| Future Scholar vs. Future Scholar 529 | Future Scholar vs. Future Scholar 529 | Future Scholar vs. Future Scholar 529 | Future Scholar vs. Future Scholar 529 |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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