Correlation Between Merck and Income Fund
Can any of the company-specific risk be diversified away by investing in both Merck and Income 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 Income 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 Income Fund Institutional, you can compare the effects of market volatilities on Merck and Income 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Income Fund.
Diversification Opportunities for Merck and Income Fund
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and INCOME is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Income Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Institutional 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Institutional has no effect on the direction of Merck i.e., Merck and Income Fund go up and down completely randomly.
Pair Corralation between Merck and Income Fund
Considering the 90-day investment horizon Merck is expected to generate 4.11 times less return on investment than Income Fund. In addition to that, Merck is 3.47 times more volatile than Income Fund Institutional. It trades about 0.01 of its total potential returns per unit of risk. Income Fund Institutional is currently generating about 0.09 per unit of volatility. If you would invest 841.00 in Income Fund Institutional on September 1, 2024 and sell it today you would earn a total of 80.00 from holding Income Fund Institutional or generate 9.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Income Fund Institutional
Performance |
| Timeline |
| Merck Company |
| Income Fund Institutional |
Merck and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Income Fund
The main advantage of trading using opposite Merck and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Income 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 Income Fund will offset losses from the drop in Income Fund's long position.The idea behind Merck Company and Income Fund Institutional 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.| Income Fund vs. Great West Goldman Sachs | Income Fund vs. Oppenheimer Gold Special | Income Fund vs. International Investors Gold | Income Fund vs. International Investors Gold |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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