Correlation Between Merck and Columbia Diversified
Can any of the company-specific risk be diversified away by investing in both Merck and Columbia Diversified 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 Columbia Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Columbia Diversified Fixed, you can compare the effects of market volatilities on Merck and Columbia Diversified 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 Columbia Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Columbia Diversified.
Diversification Opportunities for Merck and Columbia Diversified
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and Columbia is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Columbia Diversified Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Diversified 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 Columbia Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Diversified has no effect on the direction of Merck i.e., Merck and Columbia Diversified go up and down completely randomly.
Pair Corralation between Merck and Columbia Diversified
Considering the 90-day investment horizon Merck Company is expected to under-perform the Columbia Diversified. In addition to that, Merck is 2.93 times more volatile than Columbia Diversified Fixed. It trades about 0.0 of its total potential returns per unit of risk. Columbia Diversified Fixed is currently generating about 0.06 per unit of volatility. If you would invest 1,651 in Columbia Diversified Fixed on August 31, 2024 and sell it today you would earn a total of 147.00 from holding Columbia Diversified Fixed or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Merck Company vs. Columbia Diversified Fixed
Performance |
| Timeline |
| Merck Company |
| Columbia Diversified |
Merck and Columbia Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Columbia Diversified
The main advantage of trading using opposite Merck and Columbia Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Columbia Diversified 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 Columbia Diversified will offset losses from the drop in Columbia Diversified's long position.The idea behind Merck Company and Columbia Diversified Fixed 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.| Columbia Diversified vs. Columbia Multi Sector Municipal | Columbia Diversified vs. Janus Henderson Short | Columbia Diversified vs. Goldman Sachs Access | Columbia Diversified vs. iShares Yield Optimized |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |