Correlation Between Merck and Hotchkis Wiley
Can any of the company-specific risk be diversified away by investing in both Merck and Hotchkis Wiley 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 Hotchkis Wiley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Hotchkis Wiley High, you can compare the effects of market volatilities on Merck and Hotchkis Wiley 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 Hotchkis Wiley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Hotchkis Wiley.
Diversification Opportunities for Merck and Hotchkis Wiley
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Hotchkis is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Hotchkis Wiley High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley High 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 Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley High has no effect on the direction of Merck i.e., Merck and Hotchkis Wiley go up and down completely randomly.
Pair Corralation between Merck and Hotchkis Wiley
Considering the 90-day investment horizon Merck Company is expected to under-perform the Hotchkis Wiley. In addition to that, Merck is 9.27 times more volatile than Hotchkis Wiley High. It trades about -0.16 of its total potential returns per unit of risk. Hotchkis Wiley High is currently generating about 0.33 per unit of volatility. If you would invest 1,055 in Hotchkis Wiley High on August 24, 2024 and sell it today you would earn a total of 11.00 from holding Hotchkis Wiley High or generate 1.04% 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. Hotchkis Wiley High
Performance |
| Timeline |
| Merck Company |
| Hotchkis Wiley High |
Merck and Hotchkis Wiley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Hotchkis Wiley
The main advantage of trading using opposite Merck and Hotchkis Wiley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Hotchkis Wiley 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 Hotchkis Wiley will offset losses from the drop in Hotchkis Wiley's long position.The idea behind Merck Company and Hotchkis Wiley High 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.| Hotchkis Wiley vs. Short Duration Inflation | Hotchkis Wiley vs. Ab Municipal Bond | Hotchkis Wiley vs. Arrow Managed Futures | Hotchkis Wiley vs. Federated Hermes Inflation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |