Correlation Between Merck and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Merck and FT Cboe 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 FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and FT Cboe Vest, you can compare the effects of market volatilities on Merck and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and FT Cboe.
Diversification Opportunities for Merck and FT Cboe
Pay attention - limited upside
The 3 months correlation between Merck and DNOV is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Merck i.e., Merck and FT Cboe go up and down completely randomly.
Pair Corralation between Merck and FT Cboe
Considering the 90-day investment horizon Merck Company is expected to under-perform the FT Cboe. In addition to that, Merck is 11.22 times more volatile than FT Cboe Vest. It trades about -0.01 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about 0.53 per unit of volatility. If you would invest 4,258 in FT Cboe Vest on August 30, 2024 and sell it today you would earn a total of 61.00 from holding FT Cboe Vest or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. FT Cboe Vest
Performance |
| Timeline |
| Merck Company |
| FT Cboe Vest |
Merck and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and FT Cboe
The main advantage of trading using opposite Merck and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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