Correlation Between Merck and Embassy Bancorp
Can any of the company-specific risk be diversified away by investing in both Merck and Embassy Bancorp 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 Embassy Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Embassy Bancorp, you can compare the effects of market volatilities on Merck and Embassy Bancorp 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 Embassy Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Embassy Bancorp.
Diversification Opportunities for Merck and Embassy Bancorp
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Embassy is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Embassy Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Bancorp 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 Embassy Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Bancorp has no effect on the direction of Merck i.e., Merck and Embassy Bancorp go up and down completely randomly.
Pair Corralation between Merck and Embassy Bancorp
Considering the 90-day investment horizon Merck is expected to generate 19.0 times less return on investment than Embassy Bancorp. But when comparing it to its historical volatility, Merck Company is 2.5 times less risky than Embassy Bancorp. It trades about 0.0 of its potential returns per unit of risk. Embassy Bancorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,911 in Embassy Bancorp on September 3, 2024 and sell it today you would lose (266.00) from holding Embassy Bancorp or give up 13.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Merck Company vs. Embassy Bancorp
Performance |
| Timeline |
| Merck Company |
| Embassy Bancorp |
Merck and Embassy Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Embassy Bancorp
The main advantage of trading using opposite Merck and Embassy Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Embassy Bancorp 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 Embassy Bancorp will offset losses from the drop in Embassy Bancorp's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Embassy Bancorp vs. Pioneer Bankcorp | Embassy Bancorp vs. Liberty Northwest Bancorp | Embassy Bancorp vs. First Community | Embassy Bancorp vs. Coeur dAlene Bancorp |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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