Correlation Between Merck and ECN Capital
Can any of the company-specific risk be diversified away by investing in both Merck and ECN Capital 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 ECN Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ECN Capital Corp, you can compare the effects of market volatilities on Merck and ECN Capital 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 ECN Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ECN Capital.
Diversification Opportunities for Merck and ECN Capital
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and ECN is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ECN Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECN Capital Corp 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 ECN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECN Capital Corp has no effect on the direction of Merck i.e., Merck and ECN Capital go up and down completely randomly.
Pair Corralation between Merck and ECN Capital
Considering the 90-day investment horizon Merck Company is expected to under-perform the ECN Capital. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.96 times less risky than ECN Capital. The stock trades about 0.0 of its potential returns per unit of risk. The ECN Capital Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 200.00 in ECN Capital Corp on September 14, 2024 and sell it today you would earn a total of 3.00 from holding ECN Capital Corp or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 87.55% |
| Values | Daily Returns |
Merck Company vs. ECN Capital Corp
Performance |
| Timeline |
| Merck Company |
| ECN Capital Corp |
Merck and ECN Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ECN Capital
The main advantage of trading using opposite Merck and ECN Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ECN Capital 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 ECN Capital will offset losses from the drop in ECN Capital's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| ECN Capital vs. PennyMac Finl Svcs | ECN Capital vs. Velocity Financial Llc | ECN Capital vs. Encore Capital Group | ECN Capital vs. Greystone Housing Impact |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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