Correlation Between Merck and American Century
Can any of the company-specific risk be diversified away by investing in both Merck and American Century 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 American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and American Century ETF, you can compare the effects of market volatilities on Merck and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and American Century.
Diversification Opportunities for Merck and American Century
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and American is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of Merck i.e., Merck and American Century go up and down completely randomly.
Pair Corralation between Merck and American Century
Considering the 90-day investment horizon Merck Company is expected to under-perform the American Century. In addition to that, Merck is 30.18 times more volatile than American Century ETF. It trades about -0.02 of its total potential returns per unit of risk. American Century ETF is currently generating about 0.35 per unit of volatility. If you would invest 5,074 in American Century ETF on September 1, 2024 and sell it today you would earn a total of 17.00 from holding American Century ETF or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merck Company vs. American Century ETF
Performance |
| Timeline |
| Merck Company |
| American Century ETF |
Merck and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and American Century
The main advantage of trading using opposite Merck and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.The idea behind Merck Company and American Century ETF 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.| American Century vs. Valued Advisers Trust | American Century vs. Columbia Diversified Fixed | American Century vs. Principal Exchange Traded Funds | American Century vs. Doubleline Etf Trust |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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