Correlation Between Merck and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both Merck and WisdomTree Japan 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 Japan 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 Japan Hedged, you can compare the effects of market volatilities on Merck and WisdomTree Japan 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 Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WisdomTree Japan.
Diversification Opportunities for Merck and WisdomTree Japan
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and WisdomTree is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged 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 Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of Merck i.e., Merck and WisdomTree Japan go up and down completely randomly.
Pair Corralation between Merck and WisdomTree Japan
Considering the 90-day investment horizon Merck Company is expected to generate 1.56 times more return on investment than WisdomTree Japan. However, Merck is 1.56 times more volatile than WisdomTree Japan Hedged. It trades about 0.32 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.22 per unit of risk. If you would invest 8,601 in Merck Company on November 8, 2025 and sell it today you would earn a total of 3,232 from holding Merck Company or generate 37.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.67% |
| Values | Daily Returns |
Merck Company vs. WisdomTree Japan Hedged
Performance |
| Timeline |
| Merck Company |
| WisdomTree Japan Hedged |
Risk-Adjusted Performance
Solid
Weak | Strong |
Merck and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WisdomTree Japan
The main advantage of trading using opposite Merck and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WisdomTree Japan 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 Japan will offset losses from the drop in WisdomTree Japan's long position.| Merck vs. Cencora | Merck vs. Regeneron Pharmaceuticals | Merck vs. IDEXX Laboratories | Merck vs. Haleon plc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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