Correlation Between Merck and IShares Core
Can any of the company-specific risk be diversified away by investing in both Merck and IShares Core 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 IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and iShares Core 5 10, you can compare the effects of market volatilities on Merck and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IShares Core.
Diversification Opportunities for Merck and IShares Core
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and iShares Core 5 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 5 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core 5 has no effect on the direction of Merck i.e., Merck and IShares Core go up and down completely randomly.
Pair Corralation between Merck and IShares Core
Considering the 90-day investment horizon Merck Company is expected to under-perform the IShares Core. In addition to that, Merck is 3.55 times more volatile than iShares Core 5 10. It trades about 0.0 of its total potential returns per unit of risk. iShares Core 5 10 is currently generating about 0.15 per unit of volatility. If you would invest 4,297 in iShares Core 5 10 on September 3, 2024 and sell it today you would earn a total of 49.00 from holding iShares Core 5 10 or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. iShares Core 5 10
Performance |
| Timeline |
| Merck Company |
| iShares Core 5 |
Merck and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and IShares Core
The main advantage of trading using opposite Merck and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| IShares Core vs. iShares Core 1 5 | IShares Core vs. iShares Core International | IShares Core vs. iShares Core 10 | IShares Core vs. iShares Edge Investment |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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