Correlation Between Merck and 1ST SUMMIT
Can any of the company-specific risk be diversified away by investing in both Merck and 1ST SUMMIT 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 1ST SUMMIT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and 1ST SUMMIT BANCORP, you can compare the effects of market volatilities on Merck and 1ST SUMMIT 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 1ST SUMMIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and 1ST SUMMIT.
Diversification Opportunities for Merck and 1ST SUMMIT
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and 1ST is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and 1ST SUMMIT BANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1ST SUMMIT BANCORP 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 1ST SUMMIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1ST SUMMIT BANCORP has no effect on the direction of Merck i.e., Merck and 1ST SUMMIT go up and down completely randomly.
Pair Corralation between Merck and 1ST SUMMIT
Considering the 90-day investment horizon Merck Company is expected to generate 0.59 times more return on investment than 1ST SUMMIT. However, Merck Company is 1.7 times less risky than 1ST SUMMIT. It trades about 0.01 of its potential returns per unit of risk. 1ST SUMMIT BANCORP is currently generating about -0.08 per unit of risk. If you would invest 10,187 in Merck Company on September 1, 2024 and sell it today you would lose (23.00) from holding Merck Company or give up 0.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. 1ST SUMMIT BANCORP
Performance |
| Timeline |
| Merck Company |
| 1ST SUMMIT BANCORP |
Merck and 1ST SUMMIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and 1ST SUMMIT
The main advantage of trading using opposite Merck and 1ST SUMMIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 1ST SUMMIT 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 1ST SUMMIT will offset losses from the drop in 1ST SUMMIT's long position.The idea behind Merck Company and 1ST SUMMIT BANCORP 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.| 1ST SUMMIT vs. Apollo Bancorp | 1ST SUMMIT vs. Oregon Pacific Bancorp | 1ST SUMMIT vs. The Farmers Bank | 1ST SUMMIT vs. Community Bankers |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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