Correlation Between Merck and Century Next
Can any of the company-specific risk be diversified away by investing in both Merck and Century Next 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 Century Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Century Next Financial, you can compare the effects of market volatilities on Merck and Century Next 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 Century Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Century Next.
Diversification Opportunities for Merck and Century Next
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Century is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Century Next Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Next Financial 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 Century Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Next Financial has no effect on the direction of Merck i.e., Merck and Century Next go up and down completely randomly.
Pair Corralation between Merck and Century Next
Considering the 90-day investment horizon Merck Company is expected to under-perform the Century Next. In addition to that, Merck is 1.61 times more volatile than Century Next Financial. It trades about -0.18 of its total potential returns per unit of risk. Century Next Financial is currently generating about 0.41 per unit of volatility. If you would invest 3,391 in Century Next Financial on August 29, 2024 and sell it today you would earn a total of 484.00 from holding Century Next Financial or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Century Next Financial
Performance |
| Timeline |
| Merck Company |
| Century Next Financial |
Merck and Century Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Century Next
The main advantage of trading using opposite Merck and Century Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Century Next 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 Century Next will offset losses from the drop in Century Next's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| Century Next vs. Citizens Financial Corp | Century Next vs. Triad Business Bank | Century Next vs. First Ottawa Bancshares | Century Next vs. CCSB Financial Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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