Correlation Between Merck and IShares SP
Can any of the company-specific risk be diversified away by investing in both Merck and IShares SP 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 SP 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 SP 500, you can compare the effects of market volatilities on Merck and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and IShares SP.
Diversification Opportunities for Merck and IShares SP
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Merck i.e., Merck and IShares SP go up and down completely randomly.
Pair Corralation between Merck and IShares SP
Considering the 90-day investment horizon Merck Company is expected to generate 2.29 times more return on investment than IShares SP. However, Merck is 2.29 times more volatile than iShares SP 500. It trades about 0.16 of its potential returns per unit of risk. iShares SP 500 is currently generating about -0.23 per unit of risk. If you would invest 9,579 in Merck Company on September 18, 2024 and sell it today you would earn a total of 430.00 from holding Merck Company or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. iShares SP 500
Performance |
| Timeline |
| Merck Company |
| iShares SP 500 |
Merck and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and IShares SP
The main advantage of trading using opposite Merck and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.| Merck vs. Emergent Biosolutions | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries | Merck vs. Haleon plc |
| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |