Correlation Between Merck and ETRACS IFED
Can any of the company-specific risk be diversified away by investing in both Merck and ETRACS IFED 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 ETRACS IFED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and ETRACS IFED Invest, you can compare the effects of market volatilities on Merck and ETRACS IFED 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 ETRACS IFED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and ETRACS IFED.
Diversification Opportunities for Merck and ETRACS IFED
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and ETRACS is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and ETRACS IFED Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS IFED Invest 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 ETRACS IFED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS IFED Invest has no effect on the direction of Merck i.e., Merck and ETRACS IFED go up and down completely randomly.
Pair Corralation between Merck and ETRACS IFED
Considering the 90-day investment horizon Merck is expected to generate 11.74 times less return on investment than ETRACS IFED. In addition to that, Merck is 1.17 times more volatile than ETRACS IFED Invest. It trades about 0.01 of its total potential returns per unit of risk. ETRACS IFED Invest is currently generating about 0.09 per unit of volatility. If you would invest 2,781 in ETRACS IFED Invest on August 30, 2024 and sell it today you would earn a total of 1,475 from holding ETRACS IFED Invest or generate 53.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. ETRACS IFED Invest
Performance |
| Timeline |
| Merck Company |
| ETRACS IFED Invest |
Merck and ETRACS IFED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and ETRACS IFED
The main advantage of trading using opposite Merck and ETRACS IFED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, ETRACS IFED 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 ETRACS IFED will offset losses from the drop in ETRACS IFED's long position.| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| ETRACS IFED vs. Freedom Day Dividend | ETRACS IFED vs. Franklin Templeton ETF | ETRACS IFED vs. iShares MSCI China | ETRACS IFED vs. Tidal Trust II |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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