Correlation Between Merck and ProShares Trust
Can any of the company-specific risk be diversified away by investing in both Merck and ProShares Trust 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 ProShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ProShares Trust, you can compare the effects of market volatilities on Merck and ProShares Trust 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 ProShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ProShares Trust.
Diversification Opportunities for Merck and ProShares Trust
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and ProShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Merck i.e., Merck and ProShares Trust go up and down completely randomly.
Pair Corralation between Merck and ProShares Trust
Considering the 90-day investment horizon Merck Company is expected to under-perform the ProShares Trust. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 61.11 times less risky than ProShares Trust. The stock trades about -0.11 of its potential returns per unit of risk. The ProShares Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.00 in ProShares Trust on September 1, 2024 and sell it today you would earn a total of 2,709 from holding ProShares Trust or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Merck Company vs. ProShares Trust
Performance |
| Timeline |
| Merck Company |
| ProShares Trust |
Merck and ProShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ProShares Trust
The main advantage of trading using opposite Merck and ProShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ProShares Trust 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 ProShares Trust will offset losses from the drop in ProShares Trust's long position.The idea behind Merck Company and ProShares Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ProShares Trust vs. Vanguard Total Stock | ProShares Trust vs. SPDR SP 500 | ProShares Trust vs. iShares Core SP | ProShares Trust vs. Vanguard Total Bond |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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