Correlation Between Merck and First Reliance
Can any of the company-specific risk be diversified away by investing in both Merck and First Reliance 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 Reliance 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 Reliance Bancshares, you can compare the effects of market volatilities on Merck and First Reliance 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 Reliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and First Reliance.
Diversification Opportunities for Merck and First Reliance
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merck and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and First Reliance Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Reliance 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 Reliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Reliance Bancshares has no effect on the direction of Merck i.e., Merck and First Reliance go up and down completely randomly.
Pair Corralation between Merck and First Reliance
Considering the 90-day investment horizon Merck is expected to generate 4.13 times less return on investment than First Reliance. But when comparing it to its historical volatility, Merck Company is 1.53 times less risky than First Reliance. It trades about 0.01 of its potential returns per unit of risk. First Reliance Bancshares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 915.00 in First Reliance Bancshares on August 30, 2024 and sell it today you would earn a total of 65.00 from holding First Reliance Bancshares or generate 7.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. First Reliance Bancshares
Performance |
| Timeline |
| Merck Company |
| First Reliance Bancshares |
Merck and First Reliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and First Reliance
The main advantage of trading using opposite Merck and First Reliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, First Reliance 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 Reliance will offset losses from the drop in First Reliance's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| First Reliance vs. Israel Discount Bank | First Reliance vs. Baraboo Bancorporation | First Reliance vs. Danske Bank AS | First Reliance vs. Jyske Bank AS |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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