Correlation Between Merck and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Merck and Dimensional ETF 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 Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Dimensional ETF Trust, you can compare the effects of market volatilities on Merck and Dimensional ETF 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 Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Dimensional ETF.
Diversification Opportunities for Merck and Dimensional ETF
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merck and Dimensional is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Merck i.e., Merck and Dimensional ETF go up and down completely randomly.
Pair Corralation between Merck and Dimensional ETF
Considering the 90-day investment horizon Merck Company is expected to under-perform the Dimensional ETF. In addition to that, Merck is 4.45 times more volatile than Dimensional ETF Trust. It trades about -0.08 of its total potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.06 per unit of volatility. If you would invest 4,041 in Dimensional ETF Trust on August 23, 2024 and sell it today you would earn a total of 131.00 from holding Dimensional ETF Trust or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Dimensional ETF Trust
Performance |
| Timeline |
| Merck Company |
| Dimensional ETF Trust |
Merck and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Dimensional ETF
The main advantage of trading using opposite Merck and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
| Dimensional ETF vs. Hartford Short Duration | Dimensional ETF vs. American Century Diversified | Dimensional ETF vs. First Trust Short | Dimensional ETF vs. HUMANA INC |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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