Correlation Between Merck and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both Merck and Amcap 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 Amcap 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 Amcap Fund Class, you can compare the effects of market volatilities on Merck and Amcap 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Amcap Fund.
Diversification Opportunities for Merck and Amcap Fund
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Amcap is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Merck i.e., Merck and Amcap Fund go up and down completely randomly.
Pair Corralation between Merck and Amcap Fund
Considering the 90-day investment horizon Merck Company is expected to under-perform the Amcap Fund. In addition to that, Merck is 1.54 times more volatile than Amcap Fund Class. It trades about 0.0 of its total potential returns per unit of risk. Amcap Fund Class is currently generating about 0.26 per unit of volatility. If you would invest 4,449 in Amcap Fund Class on September 2, 2024 and sell it today you would earn a total of 206.00 from holding Amcap Fund Class or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Amcap Fund Class
Performance |
| Timeline |
| Merck Company |
| Amcap Fund Class |
Merck and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Amcap Fund
The main advantage of trading using opposite Merck and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Amcap 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.The idea behind Merck Company and Amcap Fund Class 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.| Amcap Fund vs. Income Fund Of | Amcap Fund vs. American Funds 2015 | Amcap Fund vs. New World Fund | Amcap Fund vs. American Mutual Fund |
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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