Correlation Between Merck and Redwood Real
Can any of the company-specific risk be diversified away by investing in both Merck and Redwood Real 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 Redwood Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Redwood Real Estate, you can compare the effects of market volatilities on Merck and Redwood Real 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 Redwood Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Redwood Real.
Diversification Opportunities for Merck and Redwood Real
-0.95 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Redwood is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Redwood Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Real Estate 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 Redwood Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Real Estate has no effect on the direction of Merck i.e., Merck and Redwood Real go up and down completely randomly.
Pair Corralation between Merck and Redwood Real
Considering the 90-day investment horizon Merck Company is expected to under-perform the Redwood Real. In addition to that, Merck is 49.95 times more volatile than Redwood Real Estate. It trades about -0.1 of its total potential returns per unit of risk. Redwood Real Estate is currently generating about 1.01 per unit of volatility. If you would invest 2,507 in Redwood Real Estate on August 28, 2024 and sell it today you would earn a total of 14.00 from holding Redwood Real Estate or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. Redwood Real Estate
Performance |
| Timeline |
| Merck Company |
| Redwood Real Estate |
Merck and Redwood Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Redwood Real
The main advantage of trading using opposite Merck and Redwood Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Redwood Real 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 Redwood Real will offset losses from the drop in Redwood Real's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Redwood Real vs. T Rowe Price | Redwood Real vs. T Rowe Price | Redwood Real vs. Aqr Large Cap | Redwood Real vs. Jhancock Disciplined Value |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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