Correlation Between Merck and PIMCO Enhanced
Can any of the company-specific risk be diversified away by investing in both Merck and PIMCO Enhanced 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 PIMCO Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and PIMCO Enhanced Short, you can compare the effects of market volatilities on Merck and PIMCO Enhanced 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 PIMCO Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and PIMCO Enhanced.
Diversification Opportunities for Merck and PIMCO Enhanced
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and PIMCO is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and PIMCO Enhanced Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Enhanced Short 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 PIMCO Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Enhanced Short has no effect on the direction of Merck i.e., Merck and PIMCO Enhanced go up and down completely randomly.
Pair Corralation between Merck and PIMCO Enhanced
Considering the 90-day investment horizon Merck Company is expected to under-perform the PIMCO Enhanced. In addition to that, Merck is 28.58 times more volatile than PIMCO Enhanced Short. It trades about -0.03 of its total potential returns per unit of risk. PIMCO Enhanced Short is currently generating about 0.47 per unit of volatility. If you would invest 9,846 in PIMCO Enhanced Short on August 29, 2024 and sell it today you would earn a total of 50.00 from holding PIMCO Enhanced Short or generate 0.51% 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. PIMCO Enhanced Short
Performance |
| Timeline |
| Merck Company |
| PIMCO Enhanced Short |
Merck and PIMCO Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and PIMCO Enhanced
The main advantage of trading using opposite Merck and PIMCO Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, PIMCO Enhanced 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 PIMCO Enhanced will offset losses from the drop in PIMCO Enhanced's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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