Correlation Between Merck and Delaware Wealth
Can any of the company-specific risk be diversified away by investing in both Merck and Delaware Wealth 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 Delaware Wealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Delaware Wealth Builder, you can compare the effects of market volatilities on Merck and Delaware Wealth 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 Delaware Wealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Delaware Wealth.
Diversification Opportunities for Merck and Delaware Wealth
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Delaware is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Delaware Wealth Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware Wealth Builder 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 Delaware Wealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware Wealth Builder has no effect on the direction of Merck i.e., Merck and Delaware Wealth go up and down completely randomly.
Pair Corralation between Merck and Delaware Wealth
Considering the 90-day investment horizon Merck Company is expected to under-perform the Delaware Wealth. In addition to that, Merck is 2.93 times more volatile than Delaware Wealth Builder. It trades about -0.05 of its total potential returns per unit of risk. Delaware Wealth Builder is currently generating about 0.18 per unit of volatility. If you would invest 1,556 in Delaware Wealth Builder on August 31, 2024 and sell it today you would earn a total of 28.00 from holding Delaware Wealth Builder or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Delaware Wealth Builder
Performance |
| Timeline |
| Merck Company |
| Delaware Wealth Builder |
Merck and Delaware Wealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Delaware Wealth
The main advantage of trading using opposite Merck and Delaware Wealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Delaware Wealth 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 Delaware Wealth will offset losses from the drop in Delaware Wealth's long position.The idea behind Merck Company and Delaware Wealth Builder 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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