Correlation Between Merck and First Ottawa
Can any of the company-specific risk be diversified away by investing in both Merck and First Ottawa 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 First Ottawa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and First Ottawa Bancshares, you can compare the effects of market volatilities on Merck and First Ottawa 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 First Ottawa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and First Ottawa.
Diversification Opportunities for Merck and First Ottawa
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and First is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and First Ottawa Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ottawa Bancshares 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 First Ottawa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ottawa Bancshares has no effect on the direction of Merck i.e., Merck and First Ottawa go up and down completely randomly.
Pair Corralation between Merck and First Ottawa
Considering the 90-day investment horizon Merck Company is expected to under-perform the First Ottawa. In addition to that, Merck is 1.14 times more volatile than First Ottawa Bancshares. It trades about -0.06 of its total potential returns per unit of risk. First Ottawa Bancshares is currently generating about 0.11 per unit of volatility. If you would invest 9,910 in First Ottawa Bancshares on September 1, 2024 and sell it today you would earn a total of 2,091 from holding First Ottawa Bancshares or generate 21.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 83.51% |
| Values | Daily Returns |
Merck Company vs. First Ottawa Bancshares
Performance |
| Timeline |
| Merck Company |
| First Ottawa Bancshares |
Merck and First Ottawa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and First Ottawa
The main advantage of trading using opposite Merck and First Ottawa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, First Ottawa 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 First Ottawa will offset losses from the drop in First Ottawa's long position.The idea behind Merck Company and First Ottawa Bancshares 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.| First Ottawa vs. Century Next Financial | First Ottawa vs. Citizens Financial Corp | First Ottawa vs. Triad Business Bank | First Ottawa vs. First Bankers Trustshares |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |