Correlation Between Merck and Institutional Fiduciary
Can any of the company-specific risk be diversified away by investing in both Merck and Institutional Fiduciary 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 Institutional Fiduciary into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Institutional Fiduciary Trust, you can compare the effects of market volatilities on Merck and Institutional Fiduciary 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 Institutional Fiduciary. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Institutional Fiduciary.
Diversification Opportunities for Merck and Institutional Fiduciary
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Institutional is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Institutional Fiduciary Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Institutional Fiduciary 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 Institutional Fiduciary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Institutional Fiduciary has no effect on the direction of Merck i.e., Merck and Institutional Fiduciary go up and down completely randomly.
Pair Corralation between Merck and Institutional Fiduciary
If you would invest 100.00 in Institutional Fiduciary Trust on August 24, 2024 and sell it today you would earn a total of 0.00 from holding Institutional Fiduciary Trust or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Merck Company vs. Institutional Fiduciary Trust
Performance |
| Timeline |
| Merck Company |
| Institutional Fiduciary |
Merck and Institutional Fiduciary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Institutional Fiduciary
The main advantage of trading using opposite Merck and Institutional Fiduciary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Institutional Fiduciary 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 Institutional Fiduciary will offset losses from the drop in Institutional Fiduciary's long position.The idea behind Merck Company and Institutional Fiduciary Trust 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.| Institutional Fiduciary vs. Vanguard Total Stock | Institutional Fiduciary vs. Vanguard 500 Index | Institutional Fiduciary vs. Vanguard Total Stock | Institutional Fiduciary vs. Vanguard Total Stock |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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