Correlation Between Merck and Future Fund
Can any of the company-specific risk be diversified away by investing in both Merck and Future Fund 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 Future Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and The Future Fund, you can compare the effects of market volatilities on Merck and Future Fund 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 Future Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Future Fund.
Diversification Opportunities for Merck and Future Fund
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Future is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and The Future Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Fund 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 Future Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Fund has no effect on the direction of Merck i.e., Merck and Future Fund go up and down completely randomly.
Pair Corralation between Merck and Future Fund
Considering the 90-day investment horizon Merck Company is expected to under-perform the Future Fund. In addition to that, Merck is 1.18 times more volatile than The Future Fund. It trades about -0.05 of its total potential returns per unit of risk. The Future Fund is currently generating about 0.25 per unit of volatility. If you would invest 2,436 in The Future Fund on August 31, 2024 and sell it today you would earn a total of 154.00 from holding The Future Fund or generate 6.32% 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. The Future Fund
Performance |
| Timeline |
| Merck Company |
| Future Fund |
Merck and Future Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Future Fund
The main advantage of trading using opposite Merck and Future Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Future Fund 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 Future Fund will offset losses from the drop in Future Fund's long position.The idea behind Merck Company and The Future Fund 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.| Future Fund vs. Vanguard Growth Index | Future Fund vs. iShares Russell 1000 | Future Fund vs. iShares SP 500 | Future Fund vs. iShares Core SP |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |