Correlation Between Merck and Dimeco
Can any of the company-specific risk be diversified away by investing in both Merck and Dimeco 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 Dimeco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Dimeco Inc, you can compare the effects of market volatilities on Merck and Dimeco 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 Dimeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Dimeco.
Diversification Opportunities for Merck and Dimeco
Excellent diversification
The 3 months correlation between Merck and Dimeco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Dimeco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimeco Inc 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 Dimeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimeco Inc has no effect on the direction of Merck i.e., Merck and Dimeco go up and down completely randomly.
Pair Corralation between Merck and Dimeco
Considering the 90-day investment horizon Merck Company is expected to under-perform the Dimeco. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.48 times less risky than Dimeco. The stock trades about 0.0 of its potential returns per unit of risk. The Dimeco Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,000 in Dimeco Inc on September 2, 2024 and sell it today you would earn a total of 0.00 from holding Dimeco Inc or generate 0.0% 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. Dimeco Inc
Performance |
| Timeline |
| Merck Company |
| Dimeco Inc |
Merck and Dimeco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Dimeco
The main advantage of trading using opposite Merck and Dimeco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Dimeco 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 Dimeco will offset losses from the drop in Dimeco's long position.The idea behind Merck Company and Dimeco Inc 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.| Dimeco vs. Absa Group Limited | Dimeco vs. Aozora Bank Ltd | Dimeco vs. Fidelity DD Bancorp | Dimeco vs. Chemung 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| CEOs Directory Screen CEOs from public companies around the world |