Correlation Between Merck and Fidelity International
Can any of the company-specific risk be diversified away by investing in both Merck and Fidelity International 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 Fidelity International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Fidelity International High, you can compare the effects of market volatilities on Merck and Fidelity International 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 Fidelity International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Fidelity International.
Diversification Opportunities for Merck and Fidelity International
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Fidelity is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Fidelity International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International 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 Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Merck i.e., Merck and Fidelity International go up and down completely randomly.
Pair Corralation between Merck and Fidelity International
Considering the 90-day investment horizon Merck Company is expected to generate 1.53 times more return on investment than Fidelity International. However, Merck is 1.53 times more volatile than Fidelity International High. It trades about -0.02 of its potential returns per unit of risk. Fidelity International High is currently generating about -0.05 per unit of risk. If you would invest 10,232 in Merck Company on September 1, 2024 and sell it today you would lose (68.00) from holding Merck Company or give up 0.66% 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. Fidelity International High
Performance |
| Timeline |
| Merck Company |
| Fidelity International |
Merck and Fidelity International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Fidelity International
The main advantage of trading using opposite Merck and Fidelity International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Fidelity International 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 Fidelity International will offset losses from the drop in Fidelity International's long position.The idea behind Merck Company and Fidelity International High 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.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |