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
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and IShares is -0.83. 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 is expected to generate 13.88 times less return on investment than IShares SP. In addition to that, Merck is 1.26 times more volatile than iShares SP 500. It trades about 0.01 of its total potential returns per unit of risk. iShares SP 500 is currently generating about 0.11 per unit of volatility. If you would invest 5,993 in iShares SP 500 on August 30, 2024 and sell it today you would earn a total of 4,001 from holding iShares SP 500 or generate 66.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| 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. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
| IShares SP vs. FT Vest Equity | IShares SP vs. Northern Lights | IShares SP vs. Dimensional International High | IShares SP vs. First Trust Exchange Traded |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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