Correlation Between Merck and Bitwise Ethereum
Can any of the company-specific risk be diversified away by investing in both Merck and Bitwise Ethereum 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 Bitwise Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Bitwise Ethereum ETF, you can compare the effects of market volatilities on Merck and Bitwise Ethereum 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 Bitwise Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Bitwise Ethereum.
Diversification Opportunities for Merck and Bitwise Ethereum
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Bitwise is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Bitwise Ethereum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitwise Ethereum ETF 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 Bitwise Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitwise Ethereum ETF has no effect on the direction of Merck i.e., Merck and Bitwise Ethereum go up and down completely randomly.
Pair Corralation between Merck and Bitwise Ethereum
Considering the 90-day investment horizon Merck Company is expected to generate 0.45 times more return on investment than Bitwise Ethereum. However, Merck Company is 2.22 times less risky than Bitwise Ethereum. It trades about -0.35 of its potential returns per unit of risk. Bitwise Ethereum ETF is currently generating about -0.22 per unit of risk. If you would invest 9,792 in Merck Company on November 18, 2024 and sell it today you would lose (1,491) from holding Merck Company or give up 15.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Bitwise Ethereum ETF
Performance |
| Timeline |
| Merck Company |
| Bitwise Ethereum ETF |
Merck and Bitwise Ethereum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Bitwise Ethereum
The main advantage of trading using opposite Merck and Bitwise Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Bitwise Ethereum 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 Bitwise Ethereum will offset losses from the drop in Bitwise Ethereum's long position.The idea behind Merck Company and Bitwise Ethereum ETF 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.| Bitwise Ethereum vs. Grayscale Funds Trust | Bitwise Ethereum vs. ProShares Trust | Bitwise Ethereum vs. iShares Ethereum Trust | Bitwise Ethereum vs. ProShares Trust |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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