Correlation Between Merck and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both Merck and WisdomTree International 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 WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and WisdomTree International Hedged, you can compare the effects of market volatilities on Merck and WisdomTree International 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 WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and WisdomTree International.
Diversification Opportunities for Merck and WisdomTree International
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and WisdomTree is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and WisdomTree International Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Merck i.e., Merck and WisdomTree International go up and down completely randomly.
Pair Corralation between Merck and WisdomTree International
Considering the 90-day investment horizon Merck Company is expected to generate 1.98 times more return on investment than WisdomTree International. However, Merck is 1.98 times more volatile than WisdomTree International Hedged. It trades about -0.01 of its potential returns per unit of risk. WisdomTree International Hedged is currently generating about -0.17 per unit of risk. If you would invest 10,373 in Merck Company on August 30, 2024 and sell it today you would lose (61.00) from holding Merck Company or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Merck Company vs. WisdomTree International Hedge
Performance |
| Timeline |
| Merck Company |
| WisdomTree International |
Merck and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and WisdomTree International
The main advantage of trading using opposite Merck and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, WisdomTree International 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 WisdomTree International will offset losses from the drop in WisdomTree International's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |