Correlation Between Merck and IShares JP
Can any of the company-specific risk be diversified away by investing in both Merck and IShares JP 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 IShares JP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and iShares JP Morgan, you can compare the effects of market volatilities on Merck and IShares JP 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 IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IShares JP.
Diversification Opportunities for Merck and IShares JP
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and IShares is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Merck i.e., Merck and IShares JP go up and down completely randomly.
Pair Corralation between Merck and IShares JP
Considering the 90-day investment horizon Merck is expected to generate 3.59 times less return on investment than IShares JP. In addition to that, Merck is 3.17 times more volatile than iShares JP Morgan. It trades about 0.01 of its total potential returns per unit of risk. iShares JP Morgan is currently generating about 0.15 per unit of volatility. If you would invest 3,303 in iShares JP Morgan on August 24, 2024 and sell it today you would earn a total of 565.00 from holding iShares JP Morgan or generate 17.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. iShares JP Morgan
Performance |
| Timeline |
| Merck Company |
| iShares JP Morgan |
Merck and IShares JP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and IShares JP
The main advantage of trading using opposite Merck and IShares JP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IShares JP 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 IShares JP will offset losses from the drop in IShares JP's long position.| Merck vs. Johnson Johnson | Merck vs. Small Cap Core | Merck vs. Freedom Holding Corp | Merck vs. Gfl Environmental Holdings |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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