Correlation Between Merck and InBankshares Corp
Can any of the company-specific risk be diversified away by investing in both Merck and InBankshares Corp 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 InBankshares Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and InBankshares Corp, you can compare the effects of market volatilities on Merck and InBankshares Corp 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 InBankshares Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and InBankshares Corp.
Diversification Opportunities for Merck and InBankshares Corp
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merck and InBankshares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and InBankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InBankshares Corp 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 InBankshares Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InBankshares Corp has no effect on the direction of Merck i.e., Merck and InBankshares Corp go up and down completely randomly.
Pair Corralation between Merck and InBankshares Corp
Considering the 90-day investment horizon Merck is expected to generate 1.89 times less return on investment than InBankshares Corp. In addition to that, Merck is 1.23 times more volatile than InBankshares Corp. It trades about 0.0 of its total potential returns per unit of risk. InBankshares Corp is currently generating about 0.01 per unit of volatility. If you would invest 786.00 in InBankshares Corp on September 1, 2024 and sell it today you would earn a total of 14.00 from holding InBankshares Corp or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Merck Company vs. InBankshares Corp
Performance |
| Timeline |
| Merck Company |
| InBankshares Corp |
Merck and InBankshares Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and InBankshares Corp
The main advantage of trading using opposite Merck and InBankshares Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, InBankshares Corp 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 InBankshares Corp will offset losses from the drop in InBankshares Corp's long position.The idea behind Merck Company and InBankshares Corp 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.| InBankshares Corp vs. Western Alliance Bancorporation | InBankshares Corp vs. Zions Bancorporation | InBankshares Corp vs. KeyCorp | InBankshares Corp vs. First Horizon National |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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