Correlation Between Merck and Exchange Bankshares
Can any of the company-specific risk be diversified away by investing in both Merck and Exchange Bankshares 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 Exchange Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Exchange Bankshares, you can compare the effects of market volatilities on Merck and Exchange Bankshares 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 Exchange Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Exchange Bankshares.
Diversification Opportunities for Merck and Exchange Bankshares
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and Exchange is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares 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 Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of Merck i.e., Merck and Exchange Bankshares go up and down completely randomly.
Pair Corralation between Merck and Exchange Bankshares
Considering the 90-day investment horizon Merck Company is expected to under-perform the Exchange Bankshares. In addition to that, Merck is 1.06 times more volatile than Exchange Bankshares. It trades about -0.11 of its total potential returns per unit of risk. Exchange Bankshares is currently generating about 0.1 per unit of volatility. If you would invest 4,100 in Exchange Bankshares on September 1, 2024 and sell it today you would earn a total of 700.00 from holding Exchange Bankshares or generate 17.07% 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. Exchange Bankshares
Performance |
| Timeline |
| Merck Company |
| Exchange Bankshares |
Merck and Exchange Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Exchange Bankshares
The main advantage of trading using opposite Merck and Exchange Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Exchange Bankshares 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 Exchange Bankshares will offset losses from the drop in Exchange Bankshares' long position.The idea behind Merck Company and Exchange Bankshares 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.| Exchange Bankshares vs. Piraeus Bank SA | Exchange Bankshares vs. Turkiye Garanti Bankasi | Exchange Bankshares vs. Delhi Bank Corp | Exchange Bankshares vs. Uwharrie Capital Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |