Correlation Between Merck and IShares VII

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Can any of the company-specific risk be diversified away by investing in both Merck and IShares VII 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 IShares VII into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and iShares VII Public, you can compare the effects of market volatilities on Merck and IShares VII 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 IShares VII. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IShares VII.

Diversification Opportunities for Merck and IShares VII

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Merck and IShares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and iShares VII Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII Public 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 IShares VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII Public has no effect on the direction of Merck i.e., Merck and IShares VII go up and down completely randomly.

Pair Corralation between Merck and IShares VII

Considering the 90-day investment horizon Merck Company is expected to under-perform the IShares VII. In addition to that, Merck is 1.45 times more volatile than iShares VII Public. It trades about -0.01 of its total potential returns per unit of risk. iShares VII Public is currently generating about 0.11 per unit of volatility. If you would invest  45,760  in iShares VII Public on September 12, 2024 and sell it today you would earn a total of  18,007  from holding iShares VII Public or generate 39.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.73%
ValuesDaily Returns

Merck Company  vs.  iShares VII Public

 Performance 
       Timeline  
Merck Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
iShares VII Public 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII Public are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Merck and IShares VII Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merck and IShares VII

The main advantage of trading using opposite Merck and IShares VII positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IShares VII 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 IShares VII will offset losses from the drop in IShares VII's long position.
The idea behind Merck Company and iShares VII Public 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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