Correlation Between Merck and Invesco High
Can any of the company-specific risk be diversified away by investing in both Merck and Invesco High 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 Invesco High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Invesco High Yield, you can compare the effects of market volatilities on Merck and Invesco High 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 Invesco High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Invesco High.
Diversification Opportunities for Merck and Invesco High
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Invesco is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Invesco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Yield 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 Invesco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Yield has no effect on the direction of Merck i.e., Merck and Invesco High go up and down completely randomly.
Pair Corralation between Merck and Invesco High
Considering the 90-day investment horizon Merck Company is expected to under-perform the Invesco High. In addition to that, Merck is 3.15 times more volatile than Invesco High Yield. It trades about 0.0 of its total potential returns per unit of risk. Invesco High Yield is currently generating about 0.11 per unit of volatility. If you would invest 740.00 in Invesco High Yield on September 13, 2024 and sell it today you would earn a total of 46.00 from holding Invesco High Yield or generate 6.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 28.95% |
| Values | Daily Returns |
Merck Company vs. Invesco High Yield
Performance |
| Timeline |
| Merck Company |
| Invesco High Yield |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merck and Invesco High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Invesco High
The main advantage of trading using opposite Merck and Invesco High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Invesco High 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 Invesco High will offset losses from the drop in Invesco High's long position.The idea behind Merck Company and Invesco High Yield 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.| Invesco High vs. Gamco Natural Resources | Invesco High vs. Invesco Energy Fund | Invesco High vs. World Energy Fund | Invesco High vs. Gmo Resources |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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