Correlation Between Merck and First American
Can any of the company-specific risk be diversified away by investing in both Merck and First American 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 American 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 American Funds, you can compare the effects of market volatilities on Merck and First American 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 American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and First American.
Diversification Opportunities for Merck and First American
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and First is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Merck i.e., Merck and First American go up and down completely randomly.
Pair Corralation between Merck and First American
If you would invest 100.00 in First American Funds on September 1, 2024 and sell it today you would earn a total of 0.00 from holding First American Funds or generate 0.0% 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. First American Funds
Performance |
| Timeline |
| Merck Company |
| First American Funds |
Merck and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and First American
The main advantage of trading using opposite Merck and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, First American 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 American will offset losses from the drop in First American's long position.The idea behind Merck Company and First American Funds 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 American vs. Barings Emerging Markets | First American vs. Sp Midcap Index | First American vs. Goldman Sachs Emerging | First American vs. Vanguard Developed Markets |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |