Correlation Between Merck and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both Merck and WisdomTree SmallCap 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 WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on Merck and WisdomTree SmallCap 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 WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WisdomTree SmallCap.
Diversification Opportunities for Merck and WisdomTree SmallCap
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and WisdomTree is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap 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 WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of Merck i.e., Merck and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between Merck and WisdomTree SmallCap
Considering the 90-day investment horizon Merck is expected to generate 10.03 times less return on investment than WisdomTree SmallCap. In addition to that, Merck is 1.02 times more volatile than WisdomTree SmallCap Quality. It trades about 0.01 of its total potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.06 per unit of volatility. If you would invest 3,948 in WisdomTree SmallCap Quality on August 30, 2024 and sell it today you would earn a total of 1,653 from holding WisdomTree SmallCap Quality or generate 41.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| Merck Company |
| WisdomTree SmallCap |
Merck and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WisdomTree SmallCap
The main advantage of trading using opposite Merck and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WisdomTree SmallCap 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 WisdomTree SmallCap will offset losses from the drop in WisdomTree SmallCap's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| WisdomTree SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Interest Rate | WisdomTree SmallCap vs. WisdomTree Japan Hedged | WisdomTree SmallCap vs. WisdomTree Interest Rate |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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